This story has been edited to reflect holding weightings made before launch.
Roundhill Investments’ latest ETF aims to capture exposure to stocks that have become darlings in the eyes of retail investors, but does so without the animal spirits of early 2021 that drove GameStop and AMC to steep stock prices.
The Roundhill MEME ETF (MEME) debuted on the NYSE Arca Wednesday with an expense ratio of 0.69%.
MEME follows a custom index from Solactive that follows stocks with elevated social media mentions and high short interest, including SPACs and ADRs. The index’s selectable universe is set at the end of each month, and reconstitutes and rebalances every two weeks based on social media and shorting activity. Companies with less than $1 billion in market capitalization are disqualified from inclusion.
The most similar fund to MEME that is trading today would be the VanEck Social Sentiment ETF (BUZZ), which uses a similar online sentiment strategy. However, that fund rebalances monthly and carries an additional 6 basis points in fees.
Roundhill CEO Will Hershey said MEME is a middle-ground option for investors who want access to the high-beta world of meme stocks, but without taking on the risk of holding a single stock that may or may not go to the moon.
“It's a way for people to potentially put on the trade to get access to or to be exposed to one of those pops, if and when they happen again, without having to be right on a single day,” he said.
On debut, the largest holdings in the company are ContextLogic, Digital World Acquisition Corp., Upstart Holdings, DraftKings and SoFi, with weights ranging from 4.39% to 4.21%.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
The two equities that brought the concept of meme stocks to mainstream attention are lower on the index. The first major meme stock, GameStop, holds a 3.96% weight, while AMC holds 4.11% weighting.
GameStop reached as high as $347 per share in late January after individual investors on Reddit’s r/wallstreetbets and similar forums bought up shares to squeeze hedge funds that had sold short more of the company’s stock than all of GameStop’s shares outstanding at the time.
AMC had its own moment in the spotlight in early June, jumping almost 400% in a matter of days with a combination of another short-squeeze call and the euphoria of widespread vaccinations against COVID-19 available to the public in the U.S.
While the animal spirits from earlier this year have largely calmed down due to inflation, COVID’s resurgence and a less accommodative Fed, Hershey said there’s still the potential for the crowd to send a new stock soaring.
“If you asked me, I would have told you that GameStop would be back at $30 by now, and I would be wrong,” he said. “So I've learned better than to try and predict how or when things will start or stop.”