Cathie Wood, the CEO of investment firm Ark Invest, has long made a name for herself by making bold bets on technology companies that can significantly disrupt various industries. So it's not surprising to see Wood interested in SoFi Technologies (NASDAQ: SOFI). SoFi went public through a special purpose acquisition company in 2021, with plans to disrupt the banking space by offering consumers a branchless, one-stop shop that met all of their banking needs online and through various digital offerings.
SoFi has grown fast, surging to over $45 billion in assets, which essentially makes it the same size as a regional bank. The stock has also done incredibly well over the past year, up nearly 72% with a market cap of $34.6 billion. Ark Invest recently trimmed some of its SoFi holdings in the ARK Blockchain & Fintech Innovation ETF (NYSEMKT: ARKF). Here are three potential reasons why.
1. Ark Invest could be taking some profits
Ark Invest sold about 21,094 shares of SoFi in mid-December, likely for a total sale of around $550,000. This is a relatively small sale when you look at Ark's total SoFi holdings. As of this writing, SoFi is the ninth-largest holding in the ARK Blockchain & Fintech Innovation ETF, consuming 3.55% of the total portfolio. Ark's total position in SoFi is currently about $40.7 million.
This does not yet indicate significant sales, but rather suggests taking some profits before the end of the year. It could be to capitalize on some capital losses in Ark's broader portfolio, or to simply take some gains after SoFi's stock has risen as much as 92% this year.
2. SoFi's valuation is high
Any way you chop it, SoFi's stock looks expensive right now, in terms of valuation. As you can see in the chart below, SoFi is expensive on both a price-to-earnings and price-to-sales ratio.
Additionally, SoFi stock trades at 33 times management's projected adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). While I'm sure the company can grow adjusted EBITDA in 2026, this still screams expensive.
Now, even if you are a believer in what SoFi has built, valuation is important. If a company trades at a high valuation, there is less margin for error, making the risk-reward proposition less attractive. And if SoFi doesn't execute, the stock could take a hit.