If you thought an ETF made up of the most luxurious stocks, as determined by social media chats, seemed like the natural conclusion to the late-January ride with a roller coaster ride through the stock market, then you were right .
On Thursday, asset manager VanEck launched the VanEck Vectors Social Sentiment ETF, which provides exposure to stocks with “the strongest investor sentiment and perception.” On Tuesday, however, VanEck’s plans to expand the fund in a standard orderly manner fell victim to the 2021 curse.
Dave Portnoy, founder of Barstool Sports and the self-proclaimed king of the retail boom, tweeted an extensive video of ’emergency press conference’ to debut the ETF.
A VanEck spokesman has a shareholder in the company that created the index that underpins the fund, though the company did not respond to a question about whether it had a role in the organized press conference.
More so, the stunt was also an awkward reminder that the man’s meta-meme could be someone else’s market manipulator.
“It’s more vague than anything else I can think of in terms of who Portnoy is and how the stocks he talks about on social media will affect what will drive the components of the index,” said Todd Rosenbluth, head of ETF and mutual fund research for CFRA. “To be clear, my understanding is that companies are going to pick up the index based on various factors.”
“The product is a little surprising,” said Tyler Gellasch, CEO of Healthy Markets. Gellasch believes the ETF “strikes currency that could very well be determined by the SEC and FINRA as market manipulation,” he said in an interview.
‘People who can directly influence the value of the individual effects are involved in the presentation of the product. Think of all the potential conflicts of interest and self-relationships you may have, things like potential progress. 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 the problems.
Related: Are ETFs safe … for retail investors?
In an interview with MarketWatch on the same day that Gary Gensler, president Joe Biden’s chairman of the Securities and Exchange Commission, addressed questions from the Senate Banking Committee, including many about the GameStop GME,
trade saga, Gellasch noted that many in the regulatory community have indicated that such activities warrant an investigation. ‘
As for the benefits of the new ETF: ‘There’s an investment case around the use of sentiment to pick stocks,’ Rosenbluth said. ‘I think the ETF will not only get attention because of Portnoy’s name, but because it’s a safer way for everyone sitting on the sidelines to watch the GameStop drive. It will be diversified, including stocks that are undervalued that could turn around, and some that have fundamental issues. ‘
The fund’s investments are mainly large capital growth companies such as Twitter Inc., TWTR,
Facebook Inc. FB,
and Amazon.com Inc. AMZN,
There are also many brands currently loved among retailers, such as Draftkings Inc. DKNG,
Tesla, TSLA,
and Penn National Gaming PENN,
a co-owner of Barstool Sports that Portnoy is known for buying.
But there are also many old-economy blue chips, such as Exxon Mobil Corp. XOM,
and BlackRock Inc. BLK,
Perhaps ironically, the fund is expected to rebalance once a month, which is regular compared to most ETFs, Rosenbluth noted, but perhaps too rarely to capture massive movements in popular stocks.
“Is it a good thing or a bad thing?” he asks rhetorically.
“It does not help investors, companies or anyone in the capital market if we continue to see that the prices of company shares are completely decoupled from their fundamental values,” Gellasch said. “Our capital markets exist to channel investor money into good companies that are doing well and growing our economy. If stock prices have nothing to do with that fundamental goal, everything breaks down. These things seem like fun, like lotto-style gambling, but there are real companies and job and retirement savings on the other side of it. ”
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