The Problem With Meme Stock ETFs and Timing

Meme stock mania returned for a second day, boosting a group of ETFs while also reminding investors of how volatile shares like GameStop Inc. can be and raising questions about the wisdom of chasing rapidly vanishing gains and losses.

The video game retailer was last trading higher by 65% after more than doubling to nearly $65 per share, a near-quadrupling compared to the stock’s Friday closing price of $17.46. Earlier this week, shares gained 75% on Monday, and at one point during the session had more than doubled.  

Many of the 87 U.S.-listed exchange-traded funds that hold GameStop stock are benefiting from the spike.

The Amplify Video Game Tech ETF (GAMR), which holds a 3.1% weighting in the stock, gained 1.9% on Monday and another 5.5% on Tuesday.

The Schwab Crypto Thematic ETF (STCE), which has a 1.9% stake in the company, rose by 3.2% on Monday and 4.9% on Tuesday.

GameStop’s reemergence as a meme stock is unfortunate timing for the now-defunct Roundhill MEME ETF (MEME). That fund shut down in December due to a lack of interest from investors. It only had $3 million in assets under management.

At the time of its closing, MEME held a 4.1% position in GameStop, as well as sizable holdings in Affirm, Coinbase, Spirit Airlines, and Robinhood—other meme stocks and quasi-meme-stocks that have soared this week.  

MEME’s shuttering is indicative of the difficulties in timing meme stocks and how ephemeral their gains can be. The exchange-traded fund launched in Dec. 2021, 11 months after GameStop’s first meme stock rally ended.  

Then it shut down this past December, five months before the next meme stock rally kicked off.

In other words, MEME missed both meme stock rallies, but was exposed to all of the meme stock downside.

It’s a cautionary tale for fund issuers who might decide to launch similar ETFs in the future: timing is everything when it comes to meme stocks.