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Why Zymergen's Stock Is Skyrocketing Today

By Scott Levine – Aug 5, 2021 at 11:47AM

Key Points

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It has been a crazy week for this synthetic-biology upstart -- and the week's not even over yet.

What happened

After plummeting 76% yesterday, shares of Zymergen (ZY) are rebounding today. As of 10:16 a.m. EDT, the stock, which had climbed as much as 59.9% at one point on Thursday, was up 46.8%.

It has been a wild trip for investors who have hitched a ride with Zymergen since its IPO in the spring. During its short history as a publicly traded company, its stock has traded as low as $7.85 and as high as $52.

A girl with a toy rocket strapped to her back raises her arm.

Image source: Getty Images.

So what

The company announced on Monday that it doesn't expect to generate revenue in 2021 and only generate nominal revenue in 2022 due to "issues with its commercial product pipeline."  Investors then raced to exit their positions yesterday. Today, however, they are sprinting to get back in.

What's behind the change of heart? It's simple: Cathie Wood.

After the stock's massive sell-off yesterday, Cathie Wood's ARK Invest decided to increase its position in the synthetic biology upstart, adding 2.47 million shares of Zymergen to the ARK Genomic Revolution ETF. According to the fund's description, it holds companies that "are focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business."

The description doesn't state that generating revenue is a prerequisite. Evidently, investors are feeling more confident (with the help of Wood) that the near-term hiccups won't preclude the company from achieving its growth prospects.

Now what

While the news of its manufacturing challenges are disheartening for investors, the company also noted that the hurdles are not insurmountable. According to acting CEO Jay Flatley, "The underlying promise of our business and technology is sound," adding that he and the rest of management are "confident in Zymergen's opportunities and prospects, although it will take longer to accomplish our goals than previously expected."

It seems that Cathie Wood is taking Flatley at his word. But it's important for investors to recognize that this growth company has many hurdles to overcome. Only investors with a high threshold for risk, therefore, should consider a position.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Zymergen Inc. Stock Quote
Zymergen Inc.
ZY
ARK ETF Trust - ARK Genomic Revolution ETF Stock Quote
ARK ETF Trust - ARK Genomic Revolution ETF
ARKG
$32.98 (0.83%) $0.27

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