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The Surprising Reason Zymergen Stock Is Soaring Today

By Neha Chamaria – Updated Aug 25, 2021 at 4:14PM

Key Points

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Ace investor Cathie Wood is buying shares of the synthetic biology company, but should you?

What happened

Zymergen (ZY) stock is racing today, trading up 15.4% as of 3:05 p.m. EDT. If you try to look up news about Zymergen, all you'd see is a flurry of class action lawsuits against the company. So what's brewing?

So what

Zymergen stock collapsed on Aug. 4 after the company stunned the market with an update that said, among other things, it doesn't expect to generate any revenue in 2021 and barely any next year as well.

It was a huge shocker given that barely months ago, when Zymergen went public through an initial public offering (IPO), it outlined an ambitious future for itself. The company even said that its sole product, Hyaline -- used to manufacture foldable touchscreens for smart devices -- should start generating sales this year.

With shareholders getting their fingers burned, attorneys are calling on them to take legal action against Zymergen, claiming the company misguided investors about its business and prospects.

So who is buying Zymergen shares and driving the stock price higher?

Two persons appearing confused while studying stock price charts on computer screens.

Image source: Getty Images.

It's Cathie Wood, the CEO of ARK Invest and a rising star in the investor community whose stock market moves are watched closely, and often replicated, by investors.

ARK Invest's ARK Genomic Revolution ETF (ARKG 0.29%) already owned Zymergen shares before the company dropped the bomb on Aug. 4. You'd think Wood would have exited the company entirely. On the contrary, Wood made her biggest purchase in Zymergen yet on Aug. 4, buying 2.47 million shares, helping the stock recoup all of its losses from the previous day, and then some. Importantly, ARK Genomic Revolution ETF has consistently bought shares of Zymergen shares since, buying another 0.48 million shares until Aug. 20, and that's driving Zymergen's stock price even higher.

Cathie Wood isn't the only one bullish about Zymergen. Several hedge funds reportedly bought Zymergen shares in the second quarter, with Morgan Stanley's latest 13F filing dated Aug. 23 revealing it bought 1.17 shares of Zymergen in Q2.

Now what

Remember, 13F data can be stale as it contains information about the previous quarter. And, as much as Cathie Wood's interest in Zymergen excites you, would you put your hard-earned money on a company that's still gauging its addressable market, hasn't launched its first product yet, is only trying to put a management team together, and has backtracked from its previous revenue projections? Especially if the stock already sports a crazy market capitalization of $1.3 billion? Think about it.

Neha Chamaria 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.
ARK ETF Trust - ARK Genomic Revolution ETF Stock Quote
ARK ETF Trust - ARK Genomic Revolution ETF
$30.58 (0.29%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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