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

Investors hoping to use the ETF to jump on the recent GameStop craze Corp.

and AMC Entertainment Holdings Inc.

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

Jamie Wise, founder of Buzz Indexes who also pursues a hedge fund strategy from Toronto, said this is because GameStop, AMC and other stock traders buzzed that they didn’t meet the index criteria on which the ETF is based.

Companies trading on major US stock exchanges with a market value of at least $ 5 billion are the first hurdles to entry, and one GameStop failed to pass the index’s last quarterly reshuffle on Jan. 1, Mr. Wise said. GameStop’s market cap was $ 9.2 billion on Thursday and rose to $ 22.7 billion at the end of January.

That aside, voters should see at least $ 1 million in the three-month average daily trading volume and be consistently talked about on social media over an extended period of time. Exactly how many entries are part of Buzz Indexes’ secret sauce.

However, the fund offers several other stocks that are popular with residents of Reddit’s WallStreetBets and Twitter. There is a 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.

That range of stocks turned out to be vulnerable to the continued downturn in the market. The recent rise in government bond yields, coupled with expectations for strong economic growth this year, has forced investors to reassess how much equity exposure they have. This has mainly been at the expense of technology and other growth stocks, many of which form BUZZ.

Stocks across the market posted further losses on Thursday as that shift continued. The ETF fell 3.6% during its trading debut, worse than the S&P 500’s 1.3% decline. PlugPower was down more than 8%, while Tesla and DraftKings were down 4.9% and 5.8% respectively.

“They are in a challenging environment right now,” said Mr. Wise to a number of voters of the fund.

This is the second go-around for Mr. Wise’s index. An earlier incarnation was used in the Sprott Buzz Social Media Insights ETF. Launched in 2016, it managed to outperform the S&P 500 in certain periods, but never garnered much fanfare. The then asset manager closed 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 seems right for an ETF built on the social media hype. Mr. Wise took no chances and brought in Dave Portnoy, founder of Barstool Sports Inc. who also considers himself a rash day trader and uses social media to promote his wild bets.

Mr. Portnoy, co-owner of Buzz Indexes, has been promoting the ETF all week since taking to his signature water cooler-esque stage in a video explaining how the fund works, how he got involved and, ultimately, why his legion online followers should buy it.

‘They showed me their algorithm. I said, ‘This is great, of course it will work’, ”said Mr. Portnoy in the video. “Twitter, social media, it all dictates stock prices.”

Mr. Wise said the decision to bring in Mr. Portnoy – who changed his Twitter profile picture to the ETF’s logo, a drawing of a bee – was a matter of course. “He is a voice among millions in the online community,” he added.

Mr. Lopez, from Van Eck, said Mr. Portnoy has no affiliation with the company, just the index provider.

Mr. Portnoy continued to build support for the ETF on Thursday even as red flashed across the stock market.

“If you don’t think what’s happening with $ BUZZ right now doesn’t show the strength of me and Barstool, I don’t know what to tell you,” Mr Portnoy tweeted, adding, “* I’m not Financial Advisor.”

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