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All great investors have a different favorite sector, but two things they have in common are vision and excellent timing. Not that they win every time, but more often than not, their intuition is proven 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 Invest ARCHhas always had a reputation for making aggressive trades in the technology sector. So when he bought five million shares of vertical takeoff and landing (VTOL) company Archer Aviation in late 2023, it looked 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 flying vehicles that serve as “air taxis“moving passengers from place to place much more easily than cars. It's a concept from The Jetsons or a TV show from the 1960s that tries to imagine what transport would look like in the 21st century. At the time of Wood's purchase, which was shared over several months, a number of positive developments took place at Archer.
In December, Archer partnered with Anduril, a defense contractor that makes autonomous military applications and products. Archer paired that announcement with news that it had raised another $340 million in capital from United Airlines and Stellantis, which both own equity in Archer. It looked like it was all systems go for a big 2025 and then Archer announced a reverse stock split.
At a December 20 shareholder 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 provides products and services under military contracts, it is likely that they will focus heavily on the US defense industry. 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 down from the $11 range to its current price of $9.75. That could give Cathie Wood a golden opportunity to buy even more shares. It remains to be seen whether she will, but it seems clear that she is a big believer in the long-term future of Archer Aviation. If you missed the opportunity to jump 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 took place between October 28th and November 13th, when Archer available for $3.20 and $4.20. She bought 2.5 million more shares on December 13th at $7.39 per share. So, even with the drop in share price due to the stock split, buying five million Archer shares was a winning trade for Cathie Wood.
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