ETF launched to capitalize on meme-stock craze is closing

An exchange-traded fund launched to capitalize on the meme-stock craze is shutting down.

The Roundhill MEME ETF
will liquidate next month, according to a statement released recently by the fund’s sponsor.

Although the fund’s launch was greeted by a flurry of reports in the financial press, it never seemed to gain traction. Assets under management for the fund have dwindled to less than $3 million, from a high around $4.75 million in February 2023.

Performance might be one reason. Since its launch nearly two years ago in December 2021, the fund has fallen by 58%.

Ironically, the closure announcement came just as the fund was capping off one of its best months since its inception. The fund has risen 21.8% in November, to $35.64 a share at Wednesday’s close, according to FactSet data. January was the only month where it saw stronger performance.

Two of the fund’s biggest holdings, Coinbase Global Inc.

and GameStop Corp.
have advanced by 17% and 32.2%, respectively, over the past five days, according to FactSet data.

The ETF tracks an equal-weighted index — known as the Solactive Roundhill Meme Stock Index — of 25 U.S.-listed stocks selected via a methodology that heavily weights both social-media buzz and short interest, two defining characteristics of the 2021 meme-stock craze.

The last day of trading will be Dec. 13. Investors will procure cash from the liquidation the following day.

It’s not the first high-profile closure of a buzzy ETF this year. Back in September, an exchange-traded fund set up to buy stocks recommended by CNBC personality Jim Cramer was closed and liquidated by its provider.

See: ETF that tracks Jim Cramer’s stock picks to close

The meme-stock craze is widely considered to have begun in January 2021, when a group of stocks that had generated followings in online communities appreciate Reddit’s Wall Street Bets saw explosive gains. Shares of GameStop rose from $3 a share to a peak near $500 a share before brokers opted to limit buy orders as clearing houses demanded more capital.

Since then, echoes of this mania have occasionally emerged, perhaps most notably in August 2022 when shares of soon-to-be bankrupt retailer Bed Bath & Beyond skyrocketed on hopes that emergency financing could help the troubled retailer turn things around.

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