BUZZ, the ETF of Social-Media Darlings, Drops in Trading Debut

Investors hoping to use the ETF to fuel the recent craze in GameStop Corp.

and AMC Entertainment Holdings Inc.

however, will be very disappointed. The ETF has 75 shares, but the video game retailer and shares of some other companies at the center of the recent Reddit trading frenzy are not included.

Jamie Wise, founder of Buzz Indexes, which also manages a hedge fund strategy from Toronto, said it’s because GameStop, AMC and other stocks that have traders buzzing did not meet the indexing criteria on which the ETF is based.

Wise said companies that trade on major US swaps and have a market value of at least $ 5 billion are the first hurdles. One GameStop could not meet the index’s last quarterly rebalance on January 1st. GameStop’s market capitalization was $ 9.2 billion on Thursday, rising to $ 22.7 billion at the end of January.

In addition, voters need to see at least $ 1 million in the average daily trading volume of three months and talk consistently on social media over a longer period of time. Exactly how many mentions are part of Buzz Indexes’ secret sauce.

However, the fund contains several other stocks that are popular with residents of Reddit’s WallStreetBets and Twitter. There is the manufacturer of electric cars Tesla Inc.,

fuel cell developer Plug Power Inc.

and online gambling site DraftKings Inc.

But there are also a variety of fixed stocks, including Ford Motor Co.

, Pfizer Inc.

and Boeing Co.

The variety of stocks was vulnerable to the continued withdrawal of the market. The recent surge in treasury yields, coupled with expectations of major economic growth this year, has forced investors to reconsider how much equity exposure they have. This was mostly to the detriment of technology and other growth stocks, many of which make up BUZZ.

Stocks across the market recorded further losses on Thursday as the shift continued. The ETF fell 3.6% with its trading debut, worse than the 1.3% S&P 500 decline. PlugPower fell more than 8%, while Tesla and DraftKings fell 4.9% and 5.8% respectively.

“They currently have a challenging environment,” he said. Wise conceded to some of the voters of the fund.

This is the second time for Mr. Wise’s index. An earlier incarnation was used in the Sprott Buzz Social Media Insights ETF. It was launched in 2016, and managed to outperform the S&P 500 over certain periods, but never received much fanfare. The asset manager closed the fund at the time after raising just $ 8.8 million, well below the viability level for an ETF.

This time, Messrs. Wise and Lopez look at the timing for an ETF based on social media. Wise caught up with Dave Portnoy, founder of Barstool Sports Inc., who sees no chance, who also considers himself a brilliant day trader and uses social media to indicate his wild bets.

Portnoy, a co-owner of Buzz Indexes, has been promoting the ETF all week since watching a video of his distinctive water-cooler podium explaining how the fund works, how he got involved and finally why he has a legion of fans online buying it.

“They showed me their algorithm. I said, ‘This is brilliant, of course it will work,’ “he said. Portnoy said in the video. “Twitter, social media, that’s all that indicates stock prices.”

Mr. Wise said that the decision to Mr. Portnoy, who changed his Twitter profile photo to bring in the ETF’s logo, a drawing of a bee, does not matter. “He’s a voice among millions in the online community,” he added.

Lopez, of Eck, said Portnoy has no affiliation with the firm, only the index provider.

Mr. Portnoy continued to gain support for the ETF on Thursday, although red flashed across the stock market.

“If you do not think that what is happening now with $ BUZZ does not show the power of me and Barstool, I do not know what to say to you,” he said. Portnoy tweeted, adding: “* I’m not a financial advisor.”

Write to Michael Wursthorn at [email protected] and Sebastian Pellejero at [email protected]