Skeptics of the meme-craze that’s re-ignited corners of the stock market may soon have a fresh way to bet against it.
Ten single-stock exchange-traded funds would bet against companies like GameStop Corp. and AMC Entertainment Holdings, according to a Monday filing with US regulators. The funds, which will be advised by Toroso Investments LLC, would add to a growing roster of single-security ETFs, which use derivatives to offer leveraged or inverse exposure.
The filings land as volatility once again seizes so-called meme stocks, causing the likes of Bed Bath & Beyond Inc. to more than double over the past month, even with several days of double-digit declines. Not only would the planned bearish single-stock ETFs provide an avenue for retail investors to short companies, but it would likely be a convenient tool for other traders as well, according to Bloomberg Intelligence.
“These have a decent chance for success because the trading crowd tends to be attracted to notoriety and volatility, and these stocks have both in spades,” said Eric Balchunas, a Bloomberg Intelligence senior ETF analyst. “Throw in the convenience factor, and a couple of these could be hits.”
Fees for the funds are not yet listed, but the most-expensive US single-stock ETFs charge expense ratios of 1.15%. Meanwhile, the spot borrowing rates to short GameStop and AMC clock in as high as 12% and 17%, respectively, according to data compiled by S3 Partners.
Single-stock funds were also filed to track MicroStrategy Inc., Coinbase Global Inc., Peloton Interactive Inc., Tilray Brands Inc., Nikola Corp., Robinhood Markets Inc., Beyond Meat Inc. and Penn Entertainment Inc.
The meme-stock phenomenon, originally born of Covid-19 lockdown boredom, has reemerged in recent weeks even as rising interest rates and recession fears rattle riskier assets. Two-thirds of the 522 respondents in the latest MLIV Pulse survey still expect some version of the meme stock mania to persist, despite the Federal Reserve’s plan to continue its policy of tightening.
Meanwhile, meme-based ETFs have gained little traction. The Roundhill MEME ETF (ticker MEME) has accumulated less than $1 million in assets after launching last December, while the VanEck Social Sentiment ETF (BUZZ) holds just $68 million. Both have underperformed the S&P 500 this year.