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Here's Why This Cathie Wood Stock Is Crashing Today

By Scott Levine – Oct 6, 2021 at 11:36AM

Key Points

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Scorpion Capital is shooting some venom at a new target today.

What happened

"A colossal scam." According to a Scorpion Capital report released today, that's a fitting characterization of Ginkgo Bioworks Holdings (DNA -9.55%), a company specializing in synthetic biology. The company, which recently went public through a merger with a special purpose acquisition company, is a holding in Cathie Wood's ARK Innovation ETF, but even Wood's seal of approval isn't enough to stave off the bears' reaction to Scorpion Capital's criticism.

As of 10:53 a.m. EDT, shares of Ginkgo Bioworks have plunged 19.6%.

A person working at a desk holds their neck in pain.

Image source: Getty Images.

So what

Scorpion Capital's cutting presentation of Ginkgo Bioworks is lengthy. In over 170 slides, Scorpion walks investors through an exhaustive review of the company, pleading the case that the company is tantamount to a grift. After conducting interviews with former employees "who indicated that they had been terminated for refusing to play along with the scheme, and who stated they knew of others pushed out for similar reasons" in addition to other investigative actions, Scorpion Capital surmises that the company is a "snake oil salesman" whose "business model is based on a dubious shell game."

Now what

With Scorpion Capital throwing a kitchen sink's worth of criticism at Ginkgo Bioworks, it's unsurprising that shares are plummeting today. Although the report may be fodder for the bears, it's critical that shareholders remember that Scorpion Capital, which maintains a short position in the stock, benefits from the stock's demise. Since it has a vested interest in seeing the stock tumble, therefore, shareholders who may be tempted to click the sell button should take a step back, taking Scorpion Capital's criticisms with a grain -- or heaping tablespoon -- of salt.

Investors will likely be closely following how Cathie Wood reacts to the report. Should she decide to close her position in the start-up, it may indicate that the critical report be taken more seriously.

Scott Levine owns shares of Ginkgo Bioworks Holdings, Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Ginkgo Bioworks Stock Quote
Ginkgo Bioworks
$1.80 (-9.55%) $0.19
Ark ETF Trust - Ark Innovation ETF Stock Quote
Ark ETF Trust - Ark Innovation ETF
$36.07 (-5.48%) $-2.09

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

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