Shares of esports company Skillz (NYSE:SKLZ) skyrocketed on Tuesday after a popular ETF revealed a brand-new position in the company. It's a big vote of confidence for the newly public company and helps it gain better visibility among retail investors. As of 12:15 p.m. EST, Skillz stock was up 13%.
Skillz recently went public via a special-purpose acquisition company (SPAC) called Flying Eagle Acquisition Corporation. The company began trading under its new ticker in mid-December, so this is a new business not many investors are aware of. While it has not yet come to Wall Street's notice in a very big way, the company is definitely on the radars of gamers. Consider that Skillz hosts 2 billion tournaments annually, and users spend more minutes per day on Skillz's platform than users of TikTok, Facebook, or YouTube spend on those platforms, according to an investor presentation from Skillz.
ARK Invest wants a piece of this esports stock. According to the updated holdings of the ARK Next Generation Internet ETF (NYSEMKT:ARKW) released on Monday, the ETF just purchased more than 215,000 shares of Skillz. That position is valued at nearly $4 million, which is a mere 0.07% of ARK's holdings. However, many retail investors follow this fund to generate investing ideas, and some are undoubtedly following ARK Invest's lead today and purchasing shares of their own, contributing to the stock's gains.
There's nothing wrong with following analysts and ETFs to get new investing ideas. In fact, that can be a good strategy. However, investors need to be careful to not blindly follow others -- investing is personal, and all investors need to do some due diligence. I'm willing to bet many bought Skillz stock today without doing any research, fearful of missing out on explosive returns.
Admittedly, Skillz stock was not on my radar until yesterday, and it certainly looks interesting at first glance. But I won't be rushing to buy shares today. Rather, I'd like to take time to evaluate its total addressable market, competitive advantages, corporate culture, and long-term monetization strategy. If Skillz is a great opportunity, then it will still be a great opportunity in the months and years to come, relieving the pressure of making a quick decision. If Skillz isn't a great opportunity, then I'll sure be glad I took the time to verify.