The VanEck Vectors Social Sentiment ETF BUZZ -3.61%
began trading on Thursday in an attempt to offset the retail investment boom and investors are creating on Reddit, Twitter and other social media platforms around their favorite stocks.
“This represented a new era of investment for us,” said Ed Lopez, head of ETF products at asset manager Van Eck Securities Corp., manager of the ETF who serves on the BUZZ ticker. “People are looking for information online and, more broadly, with sharing ideas.”
Investors who want to use the ETF to take advantage of the recent GameStop craze Corp.
and AMC Entertainment Holdings Inc.
you will be extremely disappointed, however. The ETF has 75 shares in it, but the video game retailer and shares in some other companies at the epicenter of Reddit’s recent trading frenzy are not included.
Jamie Wise, founder of Buzz Indexes who also manages a hedge fund strategy in Toronto, said that this is because GameStop, AMC and other retail stock brokers are commenting on the failure to meet the index criteria in which the ETF is based.
Companies that trade on major US exchanges and have a market value of at least $ 5 billion are the initial barriers to entry, and a GameStop failed to achieve until the last quarterly rebalancing of the index on January 1, Wise said. GameStop’s market capitalization was $ 9.2 billion on Thursday and rose to $ 22.7 billion at the end of January.
In addition, constituents need to see at least $ 1 million in a three-month average daily trading volume and be constantly commented on social media for a longer period. Exactly how many mentions are part of the secret sauce of Buzz Indexes.
However, the fund features a number of other popular stocks among the inhabitants of Reddit’s WallStreetBets and Twitter. There is the electric car maker Tesla Inc.,
Fuel cell developer power plug Inc.
and the online gambling site DraftKings Inc.
But there are also a variety of sober actions, including Ford Motor Co.
, Pfizer Inc.
and Boeing Co.
This variety of stocks proved to be vulnerable to the continuous retraction of the market. The recent rise in Treasury yields, coupled with expectations of great economic growth this year, has forced investors to reevaluate how much stock exposure they have. This occurred mainly to the detriment of technology and other growth actions, many of which constitute BUZZ.
Shares across the market recorded further losses on Thursday as this change continued. The ETF fell 3.6% on its trading debut, worse than the 1.3% drop of the S&P 500. PlugPower fell more than 8%, while Tesla and DraftKings fell 4.9% and 5.8%, respectively .
“They are facing a challenging environment at the moment,” acknowledged Wise about some of the fund’s constituents.
This is the second attempt for Mr. Wise’s index. An earlier incarnation was used in the Sprott Buzz Social Media Insights ETF. It was launched in 2016, managed to surpass the S&P 500 in certain periods, but never gained much fanfare. The asset manager at the time closed the fund after raising only $ 8.8 million, well below the viability level of an ETF.
This time, Messrs. Wise and Lopez say the timing looks right for an ETF built on the hype of social media. Without taking any chances, Mr. Wise brought in Dave Portnoy, founder of Barstool Sports Inc., who also considers himself a bold trader and uses social media to publicize his wild bets.
Mr. Portnoy, co-owner of Buzz Indexes, has been promoting the ETF all week since he stepped onto the podium in a water cooler style in a video explaining how the fund works, how it got involved and, ultimately, why. that your legion of online followers should buy it.
“They showed me their algorithm. I said, ‘This is brilliant, of course it will work,’ ”said Portnoy in the video. “Twitter, social media, all of this is dictating stock prices.”
Wise said the decision to bring Portnoy – who changed his Twitter profile image to the ETF logo, the design of a bee – was a no-brainer. “He is a voice among millions in the online community,” he added.
Van Eck’s Lopez said that Portnoy has no affiliation with the company, only with the supplier of the index.
Portnoy continued to garner support for the ETF on Thursday, even as the red glowed in the stock market.
“If you don’t think that what’s happening with $ BUZZ now doesn’t show my power and that of Barstool, I don’t know what to say to you,” tweeted Mr. Portnoy, adding: “* I am not a financial advisor. “
Write to Michael Wursthorn at [email protected] and Sebastian Pellejero at [email protected]
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