The Roundhill MEME ETF (MEME) is set to begin trading on Dec. 8, 2021. This exchange traded fund (ETF) is designed to track the Solactive Roundhill Meme Stock Index, which contains 25 equities likely to catch the interest of active retail day traders. The index applies screens related to activity on social media and short interest.
So-called meme stocks became a hot investment theme for day traders early in 2021, resulting in short squeezes on stocks such as GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC). However, the degree of speculation in stocks such as these has dropped in the interim, sending the Solactive Roundhill Meme Stock Index down by 14% during the week ending Dec. 3, 2021.
- The Roundhill MEME ETF (MEME) will include 25 so-called meme stocks.
- These stocks have high mentions on social media.
- Another selection criterion will be high short interest.
Will Hershey, CEO of Roundhill Investments, had this to say about day trading focused on so-called meme stocks: "I think it's function of too much liquidity in the system, but it's hard to say it's going away. It's not about one stock, it's not about AMC or GameStop. It's about this whole concept of retail investors—but it can be more than that—getting behind a concept or a single stock for no reason other than they just are."
According to the registration statement filed with the U.S. Securities and Exchange Commission (SEC) on Aug. 26, 2021, the following are the detailed selection criteria for the inclusion of equities in the Solactive Roundhill Meme Stock Index:
“The initial Index universe will consist of all issuers included in the Solactive GBS United States All Cap Index and that meet specified minimum market capitalization and average daily trade volume requirements. Each issuer in the universe is then assigned a 'social media activity score,' which is based on the number of mentions of a company's name or its ticker over a trailing 14-day period on specific social media platforms defined in the Index methodology, the primary purpose of which is to facilitate discussion of the performance of the financial industry generally and/or the stock or options markets specifically."
"Upon each Selection Day (as defined below), the top 50 issuers by social media activity score are then ranked according to their short interest, which is assigned by an independent third-party data provider. The resulting top 25 issuers by short interest will be selected as the components of, and equally weighted in, the Index."
"The Index components will be rebalanced bi-weekly, with selections made on every second Friday ('Selection Day'). If a Selection Day does not fall on a day on which the New York Stock Exchange is open (a 'Business Day'), then that Selection Day will be moved to the next Business Day. Any resulting adjustments to the Index will be made on the second Business Day after the Selection Day."