(Bloomberg) -- An activist short seller attack on one US firm and the threat of regulatory action against another have conspired to deal a double blow to Cathie Wood and ARK Investment Management, as both shares are among her top holdings.

Block Inc. and Coinbase Global Inc. are long-time favorites of Wood. As recently as Wednesday, the ARK Innovation ETF (ticker ARKK) bought more shares of Jack Dorsey-led Block. 

Block fell 15% Thursday after Hindenburg Research — the short seller that rattled the shares of billionaire Gautam Adani’s business empire earlier this year — said it’s betting on a decline in the stock, alleging the payments company facilitated fraudsters who took advantage of government stimulus programs during the pandemic. Meanwhile, the biggest US crypto exchange Coinbase tumbled 14% after disclosing it received a warning notice from the Securities and Exchange Commission about potential violation of securities law.

Todd Sohn, ETF strategist at Strategas Securities, said he expects the fund will stand by their theses on both names. He added that with regards to crypto, the fund is “in it for the long run.”

Coinbase currently makes up 7.5% of ARKK’s holdings, while Block represents 6.2%, according to data compiled by Bloomberg.

A representative for ARK Investment Management did not immediately respond to a request for comment. 

“If anything stands out with ARK and the team there, it’s that they stay in their names with the utmost conviction. Five hundred basis points of hikes hasn’t stopped them from adding to names that have taken a beating over the last year,” he said, referring to the Federal Reserve’s aggressive rate-hiking campaign to fight inflation. 

“So, whether it’s a headline such as Hindenburg or the COIN Wells Notice news, I tend to think they’ll perform their due diligence and decide whether or not to lighten up on a name,” Sohn added.

The recent turmoil in the banking industry has given ARKK a little lift. The fund, which bets on speculative tech stocks that are sensitive to interest rate moves, attracted the most inflows since April 2021 earlier this month as expectations for more Fed rate increases waned.

ARKK dropped 1.5% on Thursday. Since the start of the year, ARKK has surged 21%.

(Updates to market close throughout.)

©2023 Bloomberg L.P.