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Every great investor has a different favorite sector, but two things they have in common are excellent vision and timing. It’s not that they win every time, but more often than not, their instincts are proven right in the long run. With that in mind, Cathie Wood’s recent purchase of five million shares of Archer Aviation stock takes on a different meaning now that the company has announced a reverse stock split.
Cathie Wood, the CEO of ARK Invest, has always had a reputation for making aggressive trades in the tech sector. So, when she bought five million shares of vertical takeoff and landing (VTOL) company Archer Aviation in late 2023, it looked like par for the course. At the time, Archer shares were trading below $10 per share, which created tremendous upside for traders with the means to buy millions of shares at a time.
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Archer’s business model revolves around developing personal flight vehicles that serve as “air taxis” to move travelers from place to place much more easily than cars. It’s a concept from The Jetsons or a 1960s television show trying to envision what transportation would look like in the 21st century. At the time of Wood’s purchase, which was split over several months, several positive developments occurred at Archer.
In December, Archer partnered with Anduril, a defense contractor making autonomous military applications and products. Archer paired that announcement with the news that it had raised another $340 million in capital from United Airlines and Stellantis, who both own equity in Archer. It looked like all systems were going for a big 2025 and then Archer announced a reverse stock split.
At a Dec. 20 shareholders meeting, Archer shareholders approved a proposal to “increase the number of authorized shares of the Company’s Class A common stock available for issuance from 700,000,000 to 1,400,000,000.” The company also changed its bylaws to limit ownership, control or even investment in the company to American citizens.
That change may be related to Archer’s new partnership with Anduril. If the company will be providing products and services under military contracts, it’s likely they will focus heavily on the U.S. defense industry. Having foreign ownership of a company with that kind of profile and client base may compromise its ability to work on top-secret projects.
However, news of the stock split sent Archer’s share price downward from the $11 range to its current price of $9.75. That might provide a golden opportunity for Cathie Wood to buy even more shares. It remains to be seen whether she will, but it does seem clear that she’s a big believer in Archer Aviation’s long-term future. If you missed the chance to jump in when the price was under $10, you can still buy the dip before this stock rebounds.
Either way, Cathie Wood and ARK Investments will come out ahead. Public records show that Ark’s initial purchase of 2.5 million shares occurred between Oct. 28 and November 13th, when Archer was available for $3.20 and $4.20. She bought 2.5 million more shares on December 13th for $7.39 per share. So, even with the dip in share price due to the stock split, buying five million Archer shares was a winning trade for Cathie Wood.
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