BUZZ, the Social-Media Darlings ETF, falls on its commercial debut


The VanEck Vectors Social Sentiment ETF BUZZ -3.61%

It went public on Thursday in an attempt to take advantage of the retail investment boom and the excitement investors are building on Reddit, Twitter and other social media platforms around their favorite stocks.

“This represented a new era of investment for us,” said Ed Lopez, head of ETF products at asset manager Van Eck Securities Corp., a manager of the ETF that goes by the symbol BUZZ. “People get information online and, in general, by exchanging ideas.”

Investors Hoping to Use the ETF to Take Advantage of the Recent Craze at GameStop Corp.

and AMC Entertainment Holdings Inc.

However, you will be very disappointed. The ETF has 75 stocks within it, but it does not include the video game retailer and the stocks of some other companies at the epicenter of the recent Reddit trading frenzy.

Jamie Wise, founder of Buzz Indexes, who also runs a hedge fund strategy from Toronto, said this is because GameStop, AMC and other retail equity traders have been talking about not meeting the indexing criteria in which they the ETF is based.

Companies that are listed on major U.S. exchanges and have market values ​​of at least $ 5 billion are the initial barriers to entry, and a GameStop failed to deliver in the last quarterly rebalancing of the index on Jan. 1, it said. Wise. GameStop’s market capitalization was $ 9.2 billion on Thursday and rose to $ 22.7 billion at the end of January.

Other than that, constituents need to see at least $ 1 million in three-month average daily trading volume and constantly be talked about on social media for a longer period of time. Exactly how many mentions is part of the Buzz Indexes secret sauce.

However, the fund features several other stocks popular with Reddit’s WallStreetBets and Twitter inhabitants. There are electric car maker Tesla Inc.,

Plug Power fuel cell developer Inc.

and online gambling site DraftKings Inc.

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

, Pfizer Inc.

and Boeing Co.

That variety of stocks proved vulnerable to continued market decline. The recent surge in Treasury yields, coupled with expectations for great economic growth this year, has forced investors to reassess how much equity exposure they have. That has been primarily to the detriment of technology and other growth stocks, many of which make up BUZZ.

Stocks across the market posted further losses Thursday as that shift continued. The ETF fell 3.6% in its commercial debut, worse than the 1.3% fall of the S&P 500. PlugPower fell more than 8%, while Tesla and DraftKings were down 4.9% and 5.8% , respectively.

“They’re going through a challenging environment right now,” Wise acknowledged of some of the fund’s components.

This is the second round of Mr. Wise’s index. A previous incarnation was used in the Sprott Buzz Social Media Insights ETF. Launched in 2016, it managed to outperform the S&P 500 during certain periods, but it never garnered much fanfare. The asset manager at the time closed the fund after raising just $ 8.8 million, well below the viability level of an ETF.

This time, Messrs. Wise and Lopez say it seems like the right time for an ETF based on the hype from social media. Without taking any chances, Mr. Wise brought in Dave Portnoy, founder of Barstool Sports Inc., who also considers himself a tireless trader and uses social media to promote his crazy bets.

Portnoy, co-owner of Buzz Indexes, has been promoting the ETF all week since he stepped onto his signature water cooler-style podium in a video explaining how the fund works, how he got involved, and ultimately why what your legion of online followers should buy it.

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

Wise said the decision to bring in Portnoy, who swapped his Twitter profile photo for the ETF logo, a drawing of a bee, was a no-brainer. “He is one voice among millions in the online community,” he added.

Van Eck’s Lopez said Portnoy has no affiliation with the firm, only the index provider.

Portnoy continued to gain support for the ETF on Thursday, even as red blinked in the stock market.

“If you don’t think what’s happening with $ BUZZ right now doesn’t show the power of Barstool and I, I don’t know what to tell you,” tweeted Mr. Portnoy, adding: “* I’m not a financial advisor.”

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

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