If things go according to plan, investors will soon be able to conveniently short their meme stock of choice with just one instrument — an exchange-traded fund (ETF). It’s a little too convenient, and people are asking if it’s even legal, or if there’s even a point.
REX Shares, a company that prides itself on providing alternative and “cutting-edge” investment products, has filed to add a series of 10 single-stock ETFs, most of them for meme stocks including GameStop Corporation (NYSE: GME), AMC Entertainment Holdings, Inc. (NYSE: AMC), and Tilray Brands, Inc (NASDAQ: TLRY).
The firm wants to launch these single-stock short ETFs as an instrument for short-term trading. Also called inverse ETFs, these ETFs seek daily results that correspond to the inverse of the performance of an underlying stock. With this ETF, investors can go short on a single stock without needing to sell it short.
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But the fund comes with a warning, saying that it is “not suitable for all investors,” and that an investor “could lose the full principal value of his/her investment within a single day.”
According to the filing, the ETF is designed to be used “only by knowledgeable investors who understand the potential consequences of seeking daily inverse (-1X) investment results, understand the risks associated with the use of leverage, and are willing to monitor their portfolios frequently.”
On social media, people are suspicious of the proposed investment product, with some basically saying that it doesn’t make sense.
Meme stocks are notorious for being volatile, and it hasn’t really been a good year for these retail-trader favorites. Bed Bad & Beyond, Inc. (NASDAQ: BBBY) a recent favorite for retail investors, went from $5 to $30 and then fell to about $9 just within August.
Many of the stocks for the planned inverse ETF are in the same situation. But many also feel that meme stocks are here to stay, according to a recent MLIV Pulse survey.
Information for this briefing was found via the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
