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Mar 4, 2021

'Meme stock' ETF ranks among most active debuts in first hour

Retail investors are making a change for the good: WallStreetBets founder

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A new exchange-traded fund seeking to ride the companies most loved by investors online has found plenty of its own positive sentiment in its first day of trading.

More than US$350 million worth of shares in the VanEck Vectors Social Sentiment ETF (ticker BUZZ) had changed hands by 12:02 p.m. in New York, according to data compiled by Bloomberg.

That level of activity means it’s already among the top 10 debuts by any ETF, according to Bloomberg Intelligence analyst Eric Balchunas.

“Normally, this kind of blow-the-roof-off volume for the first day is for ETFs that open up a new asset class like gold or Bitcoin,” he said.

The fund, which has been promoted by Barstool Sports Inc. founder Dave Portnoy, follows an index that uses AI to scan online sources like blogs and social media to identify the 75 most favorably mentioned equities.

Because of its criteria for inclusion, the hottest names among the day-trading crowd like GameStop Corp. and AMC Entertainment Holdings Inc. don’t actually make it into the gauge. Its top holdings currently are Ford Motor Co., Twitter Inc. and DraftKings Inc.

Nonetheless, the rapid uptake suggests VanEck has succeeded in tapping into the increasingly powerful retail investing cohort.

“Given the explosion of individual, younger retail traders, it makes sense to see a pile of volume,” said Dave Lutz, macro strategist at JonesTrading. “Whether it is the WSB crowd embracing Dave Portnoy’s marketing of the ETF, or institutions playing it to bet on the direction of the trend (or hedge) -- we won’t know for a bit. I suspect it’s a bit of both.”

The fund opened at US$24.40. It was down 1 per cent at US$24.15 at 12:02 p.m.