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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 doesn’t mean they win every time, but more often than not, their instincts prove correct 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, CEO Ark Investmenthas always had a reputation for making solid business deals in the technology sector. So, when it bought five million shares of vertical take-off and landing (VTOL) company Archer Aviation in late 2023, it seemed par for the course. At the time, Archer shares were trading at less than $10 per share, creating a massive rally 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 flying vehicles that serve as “Air taxis“To move travelers from one place to another much more easily than cars. It’s a concept from The Jetsons or a 1960s TV show that tries to envision what transportation would look like in the 21st century. At the time of Wood’s purchase, which was split over several months later, several developments had occurred Positive in Archer.
In December, Archer partnered with Anduril, a defense contractor that makes autonomous military applications and products. Archer linked the announcement to news that it had raised another $340 million in capital from United Airlines and Stellantis, which own shares in Archer. It looked like it was all systems go towards 2025, and then Archer announced a reverse stock split.
At a stockholder meeting held on December 20, 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 internal regulations to limit ownership, control, or even investment in the company to American citizens.
This change may be related to Archer’s new partnership with Anduril. If the company were to provide products and services under military contracts, it would likely focus largely on the U.S. defense industry. Obtaining foreign ownership of a company with this type of profile and client base may compromise its ability to work on top-secret projects.
However, news of the stock split sent Archer’s stock price down from the $11 range to its current price of $9.75. This could provide a golden opportunity for Cathie Wood to buy more shares. It remains to be seen whether it will do so, but it seems clear that it believes strongly in Archer Aviation’s long-term future. If you missed the opportunity to get in when the price was below $10, you can still buy the dip before this stock rebounds.
Either way, Cathie Wood and ARK Investments will come out on top. Public records show that Ark’s initial purchase of 2.5 million shares occurred between October 28 and November 13, when Archer It was available for $3.20 and $4.20. It purchased an additional 2.5 million shares on December 13 for $7.39 per share. Therefore, even with the decline in stock price due to the stock split, purchasing five million shares of Archer stock was a bargain for Cathie Wood.
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