On Tuesday, 19 September 2023, ARK Invest LLC (“ARK Invest” or “ARK”), the parent of ARK Investment Management LLC, has acquired Rize ETF for £5.25m. This transaction can be seen as a major step for the global expansion strategy of ARK Invest, as this will enable them to launch UCITS ETFs on an existing ETF platform. This can immediately be distributed across Europe and in other parts of the world (Latin America and Asia), where UCITS is an acknowledged regulatory standard. The Rize ETF platform will be renamed to ARK Invest Europe.
From my point of view the deal makes a lot of sense for ARK Invest since it acquired an up-and-running ETF platform for £5.25m. Even though the overall ETF business of Rize ETF might not be profitable, it is significantly more expensive to build an ETF platform and create all necessary connections to market makers, authorized participants, and trading platforms from scratch. This acquisition helps ARK Invest avoid that.
Nevertheless, it remains to be seen whether ARK Invest will develop products generating investor interest and demand in Europe. Another interesting point of the deal is the announcement of Asset Co. (the former majority stakeholder [63%] of Rize ETF) will partner with ARK Invest Europe platform to launch “several” ETFs for River and Mercantile (an active asset manager owned by Asset Co.) on the new platform.
Another interesting point of this deal is the price, since Asset Co. acquired a 63% stake in Rize ETF in July 2021 for £16.5m, which means that Rize ETF had an overall value of £26.2m at that point in time. Asset Co. wrote down the value of Rize ETF in June 2023 by roughly £5m to approximately £12m after stating the business was “materially behind plan.” This means that the overall Rize ETF business still had a value of £19.0m at this point in time. This observation makes the acquisition price of £5.25m look like a bargain. But only time will tell if this was really a bargain.
Even as the setup of ARK Invest Europe looks promising, history has shown that it takes—even for well-known asset managers—a lot of effort to build a successful ETF brand in Europe.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.
