BUZZ, the ETF of Social-Media Darlings, Drops in Trading Debut -- Update
March 04 2021 - 5:47PM
Dow Jones News
By Michael Wursthorn and Sebastian Pellejero
The VanEck Vectors Social Sentiment ETF started trading Thursday
in a bid to play off the retail-investing boom and the buzz
investors are creating on Reddit, Twitter and other social-media
platforms around their favorite stocks.
"This represented to us a new era of investing," said Ed Lopez,
head of ETF product at asset manager Van Eck Securities Corp.,
manager of the ETF that goes by the ticker BUZZ. "People are
sourcing information online and, more broadly, with the sharing of
ideas."
Investors hoping to use the ETF to hop on the recent craze in
GameStop Corp. and AMC Entertainment Holdings Inc. will be sorely
disappointed, though. The ETF has 75 stocks within it, but the
videogame retailer and shares of some other companies at the
epicenter of the recent Reddit-trading frenzy aren't included.
Jamie Wise, founder of Buzz Indexes who also runs a hedge fund
strategy out of Toronto, said that is because GameStop, AMC and
other stocks retail traders have been buzzing about failed to meet
the indexing criteria on which the ETF is based.
Companies that trade on major U.S. exchanges and have market
values of at least $5 billion are the initial hurdles for entry,
and one GameStop failed to meet as of the index's last quarterly
rebalance on Jan. 1, Mr. Wise said. GameStop's market cap was $9.2
billion on Thursday and rose as high as $22.7 billion in late
January.
Other than that, constituents need to see at least $1 million in
three-month average daily trading volume and be consistently talked
about on social media over a longer period. Exactly how many
mentions is part of Buzz Indexes's secret sauce.
However, the fund features several other stocks popular with the
denizens of Reddit's WallStreetBets and Twitter. There is
electric-car maker Tesla Inc., fuel-cell developer Plug Power Inc.
and online gambling site DraftKings Inc. But there is also a
variety of staid stocks, including Ford Motor Co., Pfizer Inc. and
Boeing Co.
That assortment of stocks proved vulnerable to the market's
ongoing pullback. The recent surge in Treasury yields, coupled with
expectations for big economic growth this year, has forced
investors to reassess how much stock exposure they have. That has
mostly been to the detriment of tech and other growth stocks, many
of which make up BUZZ.
Stocks across the market registered further losses on Thursday
as that shift continued. The ETF fell 3.6% in its trading debut,
worse than the S&P 500's 1.3% slide. PlugPower dropped more
than 8%, while Tesla and DraftKings were off 4.9% and 5.8%,
respectively.
"They're having a challenging environment right now," Mr. Wise
conceded of some of the fund's constituents.
This is the second go-around for Mr. Wise's index. An earlier
incarnation was used in the Sprott Buzz Social Media Insights ETF.
It was launched in 2016, managed to outperform the S&P 500 over
certain periods but never garnered much fanfare. The asset manager
at the time shut the fund after raising just $8.8 million, well
below the level of viability for an ETF.
This time around, Messrs. Wise and Lopez say the timing appears
right for an ETF built on social-media hype. Not taking any
chances, Mr. Wise brought in Dave Portnoy, founder of Barstool
Sports Inc. who also considers himself a brash day trader and uses
social media to tout his wild bets.
Mr. Portnoy, a part owner in Buzz Indexes, has been promoting
the ETF all week since he took to his signature water-cooler-style
podium in a video explaining how the fund works, how he got
involved, and, ultimately, why his legion of online followers
should buy it.
"They showed me their algorithm. I said, 'This is brilliant, of
course it will work,'" Mr. Portnoy said in the video. "Twitter,
social media, all of it is dictating stock prices."
Mr. Wise said the decision to bring in Mr. Portnoy -- who has
changed his Twitter profile picture to the ETF's logo, a drawing of
a bee -- was a no-brainer. "He's a voice among millions in the
online community," he added.
Mr. Lopez, of Van Eck, said Mr. Portnoy has no affiliation with
the firm, only the index provider.
Mr. Portnoy continued to drum up support for the ETF on
Thursday, even as red flashed across the stock market.
"If you don't think what is happening with $BUZZ right now
doesn't show the power of me and Barstool, I don't know what to
tell you," Mr. Portnoy tweeted, adding, "*I am not a financial
advisor."
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and
Sebastian Pellejero at sebastian.pellejero@wsj.com
(END) Dow Jones Newswires
March 04, 2021 17:32 ET (22:32 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.