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- Cathie Wood's Ark Invest reversed its recent dip-buying in Zillow and sold 3.9 million shares on Wednesday.
- The move came after Zillow stock plunged 25% on its disastrous exit from the home-flipping business.
- Ark Invest still owns more than 6 million shares of Zillow across its ETFs as of Thursday.
Cathie Wood's Ark Invest is changing its tune on Zillow stock after the real estate company exited its iBuyer home-flipping business earlier this week.
The suite of ETFs managed by Ark sold a combined 3.9 million shares of Zillow on Wednesday, as they plummeted 25% following poor earnings results and a $304 million write-down related to its current housing inventory.
"We've determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility," Zillow CEO Rich Barton said.
The share sale by Ark follows a buy of about 300,000 shares during Tuesday's initial decline.
Ark Invest does own shares of Opendoor, suggesting the investment firm remains bullish on technology companies' ability to disrupt the home-buying process. And Ark still owns more than 6 million shares of Zillow worth $430 million, after slashing its investment by 38%.
Zillow waded into buying physical homes, fixing them up, and then reselling them in 2018. But according to the company, the global pandemic made it nearly impossible for it to predict home price movements in the short-term.
And despite home prices surging to record highs, Zillow was still unable to sell its housing inventory for a consistent profit. Instead, it often bought a home, invested a few thousand dollars for cosmetic touch-ups, and then quickly listed the house for a loss.
Zillow's wind-down of its home-flipping business is expected to take several quarters as it sells the rest of its housing inventory, and will result in the company reducing its workforce by about 25%.
Barton told CNBC on Tuesday the company is not in "fire sale" mode to get rid of its housing inventory, but is "in a hurry" to get them ready for sale.
Investors shouldn't take Zillow's failure in flipping homes as a sign that the housing market is nearing a top, he said, adding that the fundamentals of the housing market remain "quite strong."
Zillow stock is down more than 30% this week alone, and has plunged 50% year-to-date. Shares rebounded 3% in early Thursday trades.