In this episode, Cathie Wood, CEO of ARK Investment Management, joins Melissa Francis and Magnifi by TIFIN to discuss her views on Tesla, Twitter, and Disruptive Innovation.
Watch the Full Interview at Magnifi by TIFIN
Melissa Francis
Welcome everyone today. We're here to talk about Magnifi by TIFIN a marketplace, where you can harness real-time proprietary data to help individual investors and financial advisors find, compare, and buy investment products like stocks and ETFs mutual and model portfolios to grow and preserve your wealth. I'm Melissa Francis. I know just a little bit about this subject matter. I'm a former CNBC MSNBC Fox business and Fox news anchor. And you will remember if you've watched us before we talked about the best crypto investment strategies with Anthony Scaramucci, the best bond with the bond king himself, Jeffrey Gunlock, and the best private equity strategies with Marty Neite. Now we have a very special guest that I am super excited about to talk about stocks, um, and everything hot out there, Kathy Wood. She's the CEO of arc. She is a board member of TIFIN, which is Magnifi's parent company, Kathy.
Melissa Francis
So thank you so much for being here. I wanna drill down on your latest blog because there were so many good nuggets in there, and I found some of them kind of counterintuitive. So I wanna get into those, but first, if I could take you to the hot story of the day, which of course is Twitter. And I wanted to ask you, um, looking at where things stand today, and I know as fast-moving, it keeps changing, but, um, if you were Elon Musk, what would your next move be? What would you do from here?
Kathy Wood
Well, he's got a $54, I guess it's $54 and 20 cent offer out there. Uh, so I think he'll buy it his time. It will be interesting to see if other bidders, uh, show up. I'm uh, I'm hearing that there are some, so let's see. Not, not quite sure it's still quite fluid, right?
Melissa Francis
Yeah, no. And he says that if this doesn't work, he has plan B what do you think that is?
Kathy Wood
Goodness, I don't know if it would be something a little more hostile. Just I have no idea, you know, uh, Elon Musk is, has his own mind and, and is, uh, and I'm sure thinking very creatively about this.
Melissa Francis
If he does succeed and you, or him again, what would you do with the company? What do you think they need to correct?
Kathy Wood
Well, one of the things that, uh, I think has hampered Twitter is its advertising model and this is what scares, uh, analysts out there. Oh my gosh. You know, uh, he's going to upend the advertising model, uh, because advertisers don't like to be, uh, to have their ad shown next to questionable content, which is something different for everyone, right? Uh, and so this idea of perhaps a subscription service is a possibility or a tipping service, uh, but certainly open sourcing. The algorithm will be the first thing he'll do, uh, so that, uh, the there's transparency associated with what is and is not censored.
Melissa Francis
So do you think that's a good or a bad thing for the company? I mean, it might be a good thing for freedom of speech or however, may you, you may look at it politically, but if you were a shareholder, is it a good idea for him to get that out there? So everybody knows how the algorithm really works?
Kathy Wood
Well, I think even Jack Dorsey thought that Twitter was beginning to tie itself in knots over censorship. And, so he was trying to figure out what can we do to overcome this monster really. And, uh, so I think they do need to do something. Um, uh, many people would describe what's happened to te uh, Twitter as, uh, becoming us pool. Now we don't think that we use Twitter. Uh, it's, it's become quite important to our business as have other social media, uh, platforms. Uh, and so we know that we can unfollow someone, uh, that is hampering our research or our ability to engage with others in a civil way. Um, but I, I think that, um, I think that even Jack was saying, okay, we need a change. We have to change what we're doing. And I think he and Elon probably are aligned, uh, and this idea of an open-source algorithm, a shift away from the advertising model towards something, uh, more or subscription-based and, you know, more transparency. I mean, uh, Ark is radically transparent. Everything we do, uh, is transparent and it has done nothing but help our business. Sure. You've got, uh, people out there who are, um, denigrating our work. Uh, but we know those people as, as we drill into what they're saying, they're not doing any research. We're really interested in engaging with people who are doing real research. Uh, and I think transparency, uh, would make that make, uh, our experience with Twitter even better.
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Melissa Francis
Yeah. The fact that you're not afraid to engage like that and to, you know, hear from those who might pose you shows how confident you are about what you're doing. You have to wonder about a company that wants to hide what they're doing. Let me ask you though, on, on the Twitter front, um, so what do you think the company's worth? I mean, I know I wanna talk to you about your Tesla target, but as you look at what Elon's willing to pay, um, what do you think if you had to put a price target on the stock two years down, or four years down the road, what would you say?
Kathy Wood
Well, I think there's so much uncertainty right now that I couldn't give you one. Um, based on their existing model, our compound annual rate of return expectation, uh, for Twitter is, uh, roughly 25%. Now, their model's going to change. There are going to be a lot of dislocations. We have a lot of very short-term-oriented shareholders who are probably now have moved into Twitter to make a fast buck, 54, uh, 20, $54, and 20 cents. Uh, but the model's going to change. And so we will revisit once we understand what's going on, we will revisit the upside to the model. And we do think that, uh, uh, a lot can be done to improve the model. So, it may take more time than even our five-year investment time horizon.
Melissa Francis
So it, if you, if Elon Musk does get control of the company, would you adjust that upward? Do you think it has more potential with him in charge or would it be more of a wait and see, how would you feel?
Kathy Wood
We probably would have more confidence in the platform, uh, would want to hear what Elon, um, uh, has, in mind in terms of perpetuating the platform. Uh, I'm sure he does not want to run it as a charitable organization or a nonprofit. So we'd like to see how he thinks it could become a very transparent, but also self-sustaining, uh, model. And, you know, he's very creative and I think that it is our global town square and, and that a lot of people would miss it. Uh, so, uh, I think there would be a lot of people, very supportive and very open to his ideas.
Melissa Francis
So putting politics aside entirely, and just thinking about pure money as a shareholder, you would be in favor of Elon Musk taking over?
Kathy Wood
Well, I do think that, uh, the route Jack was going, which we supported was opening up the algorithm or open-sourcing it in some way. Um, and, and so I think this is a continuation of that. We also think one of the reasons we have held Twitter is because we believe, uh, it is a verification platform, you know, the little blue check, and we believe that it could become a verification platform for NFTs as well. Uh, and so, you know, there, there are a few call options here, and, uh, there are verification algorithms we think are well respected out there. And, uh, so I think, uh, Elon would also build on that.
Melissa Francis
Wow, fascinating stuff. That's great. I'm sure you just made some news there without question before we stray too far from Elon, because he is such a fascinating character. I know that you put a 20, 26 target on Tesla of $4,600. How did you work that math and how do you feel about that call?
