Cathie Wood’s Ark Invest has significantly reduced its valuation for Twitter, according to an interview with Wood published by the Wall Street Journal. This revelation is surprising considering Wood’s previous support for Twitter’s billionaire owner Elon Musk. However, Wood remains optimistic about the future of the social media company, citing a relatively unexpected reason.

Since Musk took Twitter private in October with a $44 billion enterprise value, Ark has lowered its valuation for the company by 47%, now valuing it at around $25 billion. Despite falling advertising revenues, this new valuation is still higher than Fidelity’s assessment of $15 billion.

Wood expressed her desire to buy more equity in Twitter, but she is unable to find a seller. According to her, this situation speaks volumes about the prospects for the company. She also pointed out the increased competition from Meta as a potential boost for Twitter. Wood believes that Twitter and Meta’s rival app, Threads, can coexist, and she thinks Threads has ignited a competitive fire within Twitter.

It’s worth noting that Ark previously owned approximately 1.1 million shares of Twitter across its various ETFs before Musk’s stake and purchase agreement were disclosed. The company still maintains an undisclosed stake in Twitter through its venture capital fund.

Wood gained recognition in recent years for Ark’s flagship Innovation ETF, which delivered a nearly 700% return between 2014 and 2021. The fund’s success was driven by early investments in Tesla and well-timed investments in pandemic favorites like Zoom.

Wedbush analyst Dan Ives, known for his early bullishness on Tesla, deemed Musk’s Twitter purchase as one of the most overpaid tech acquisitions in history. Ark’s Innovation ETF has underperformed major stock indexes, declining nearly 60% over the past two years.

According to Musk, Twitter still faces challenges with a heavy debt load and a significant decline in ad revenue. Nevertheless, Wood has previously expressed her admiration for Musk, calling him a “renaissance man” and the “inventor of our age,” and she remains excited about his vision for Twitter.

Since the July 5 launch of Threads, Meta’s stock has increased by nearly 6%. Despite some user criticism regarding changes to Twitter under Musk’s leadership, analysts predict that Meta could add billions of dollars in incremental revenue in the coming years through its Twitter dupe.

In conclusion, Ark Invest has lowered its valuation for Twitter, but Cathie Wood remains optimistic about the company’s future. With increased competition from Meta, Wood sees potential for Twitter to thrive. However, Ark’s Innovation ETF has faced challenges in recent years, and Twitter continues to grapple with declining ad revenue. Nevertheless, Wood maintains her faith in Elon Musk and his vision for Twitter as she searches for opportunities to increase her equity in the company.