If you thought an ETF made up of the yellow stocks, as confirmed by social media chats, it was like the natural decision to ride Reddit’s fuel-roller ride on the end of January through the stock market, you were right.
On Thursday, VanEck’s asset manager will launch VanEck Vectors’ Sentiment Social ETF, which will provide stocks with the “most bullish investor sentiment and sentiment.” On Tuesday, however, VanEck ‘s plans to distribute the fund in the usual 2021 cursed way suffered.
Dave Portnoy, founder of Barstool Sports and self-proclaimed king of retail trading, tweeted at a video “emergency press conference” neatly prepared for the first time of the ETF.
Portnoy is a shareholder in the company that created the index that underpins the fund, a spokesman for VanEck confirmed, although the company did not answer a question whether it had a stake in the conference news held.
More to the point, the stunt was also an uncomfortable reminder that one man’s meta meme may be the market handler of another.
“This is warmer than anything I can think of in terms of who Portnoy is and how the stocks he talks about on social media will influence indexes,” ”Said Todd Rosenbluth, head of ETF and his fellow-research fund for CFRA. “To be clear, my understanding is that companies are going to make it into the index based on a number of factors. ”
“The result is a bit mind-boggling,” said Tyler Gellasch, executive director of Healthy Markets. Gellasch believes the ETF appears to be “taking advantage of what could well be proven by SEC and FINRA as market manipulation,” he said in an interview.
“People who directly influence the value of individual securities are involved in offering the product. Think of all the conflicts between interests and self-dealing you might have, things like a possible front-run. Their own Twitter feeds, their own public statements change the value of the underlying securities and affect the underlying portfolio. ”
VanEck did not immediately respond to those concerns, either.
Related: Are ETFs safe … for retail investors?
Speaking to MarketWatch on the same day Gary Gensler was elected, President Joe Biden was elected chairman of the Securities and Exchange Commission, questions from the Senate Banking Committee, including much about the GameStop GME ,
trade saga, Gellasch noted that many in the ruling community had identified such activities as “in need of scrutiny.”
Regarding the merits of the new ETF, “There is an investment issue in using sentiment to select stocks,” Rosenbluth said. “I think the ETF will get attention not just because of Portnoy’s name, but because of everyone who sat on the sidelines and watched the GameStop scare, this is a safer way has taken part in that. It will be diversified, including some unvalued stocks that may turn around, and some that have underlying business issues. ”
Big-cap growth companies like Twitter Inc., TWTR, are usually the owners of the funds.
Facebook Inc. FB,
and Amazon.com Inc. AMZN,
There are also plenty of brands right now that are popular with retailers, such as Draftkings Inc. DKNG,
Tesla, TSLA,
and Penn National Gaming PENN,
part owner of Barstool Sports which Portnoy is famous for buying.
But there are plenty of old-fashioned blue chips as well, like Exxon Mobil Corp. XOM,
and BlackRock Inc. BLK,
Perhaps ironically, the fund is expected to rebalance once a month, which is often the case compared to most ETFs, Rosenbluth noted, but perhaps too rarely to make major movements in capturing popular stocks.
“Is that a good thing or a bad thing?” he asked astronomically.
“It will not help investors, companies or really anyone in the capital markets if we continue to see companies’ stock prices completely detached from their core values, ”Gellasch said. “Our capital markets are there to turn investors’ money into good companies that are doing well and growing our economy. When stock prices have nothing to do with that underlying cause, everything breaks down. These things look fun, like lottery-style gambling, but at the other end of it are real companies and jobs and retirement savings. ”
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