If you thought that an ETF made up of the most buzzing stocks, as determined by social media chatter, seemed like the logical conclusion to the late January Reddit-powered roller coaster ride on the stock market, then you were right.
On Thursday, asset manager VanEck will launch the VanEck Vectors Social Sentiment ETF, which offers exposure to stocks with "the most optimistic investor sentiment and perception." On Tuesday, however, VanEck's plans to roll out the fund in the standard orderly fashion fell victim to the 2021 curse.
Dave Portnoy, founder of Barstool Sports and self-proclaimed king of the retail boom, tweeted an elaborately produced video about the "emergency press conference" to debut the ETF.
Portnoy is a shareholder in the company that created the index underlying the fund, a VanEck spokesperson confirmed, although the company did not respond to a question as to whether it had a role in the staged press conference.
In fact, the stunt was also an awkward reminder that one man's metameme could be another's market manipulator.
"This is more vague than anything else I can think of in terms of who Portnoy is and how what will drive the components of the index will be affected by the stocks he talks about on social media," said Todd Rosenbluth, head of ETF. and mutual funding research for CFRA. "To be clear, I understand that companies will enter the index based on various factors."
"The product is kind of amazing," said Tyler Gellasch, Healthy Markets Executive Director. Gellasch thinks the ETF "appears to be taking advantage of what could very well be defined by SEC and FINRA as market manipulation," he said in an interview.
“People who may have a direct influence on the value of the individual securities are involved in offering the product. Think of any potential conflicts of interest and self-service you could have, things like potential front-running. Their own Twitter feeds, their own public statements can change the value of the underlying securities and affect the underlying portfolio. "
VanEck also did not immediately respond to those concerns.
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Speaking to MarketWatch on the same day that Gary Gensler, President Joe Biden & # 39; s election to chair of the Securities and Exchange Commission, raised questions from the Senate Banking Committee, including many about the GameStop
trade story, Gellasch noted that many in the regulatory community had indicated that such activities "should be scrutinized."
As for the merits of the new ETF, "There is an investment issue around using sentiment to select stocks," said Rosenbluth. “I think the ETF will not only attract attention because of Portnoy's name, but also because this is a safer way for everyone who sat on the sidelines and watched the GameStop craze to participate. diversified, including some undervalued stocks that could flip, and some with fundamental business cases. "
The fund's holdings are primarily large-cap growth companies such as Twitter Inc.,
and Penn National Gaming
a co-owner of Barstool Sports for which Portnoy is known.
But there are also plenty of old-fashioned blue chips, such as Exxon Mobil Corp.
and BlackRock Inc.
Ironically, the fund is expected to rebalance once a month, which is common compared to most ETFs, Rosenbluth noted, but perhaps too little to capture massive moves in popular stocks.
"Is that a good thing or a bad thing?" he asked rhetorically.
"It helps investors, companies, or really no one in the capital markets when we keep seeing company stock prices completely decoupled from their fundamental values," said Gellasch. “Our capital markets are there to channel investor money into good companies that are doing well and growing our economy. If stock prices don't relate to that fundamental goal, everything will break. These things seem like fun, like lottery-style gambling, but then again, there are real businesses and jobs and retirement savings. "
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