Single-Stock ETFs Would Let Bears Bet Against AMC, Tilray And Other Meme Stocks: What Investors Should Know

Zinger Key Points
  • Rex Shares plans to offer single-stock short ETFS for 10 underlying meme stocks.
  • The ETFs would provide daily investment returns corresponding to inverse proportion of underlying stocks.

Investors can soon short all their favorite meme stocks with the immunity offered by an exchange-traded fund.

What Happened: Rex Shares is planning to add 10 new series of inverse single stock ETFs, mostly meme stocks, Form N1-A filed by funds’ advisor Tidal ETF Trust II late Monday showed.

The stocks for which Rex Shares, the sponsor, has proposed ETFs are:

  • MicroStrategy, Inc. MSTR
  • Coinbase Global, Inc. COIN
  • GameStop Corporation GME
  • AMC Entertainment Holdings, Inc. AMC
  • Peloton Interactive, Inc. PTON
  • Tilray Brands, Inc. TLRY
  • Nikola Corporation NKLA
  • Robinhood Markets, Inc. HOOD
  • Beyond Meat, Inc. BYND
  • Penn Entertainment, Inc. PENN

The ETFs seek daily inverse investment results and are intended to be used as short-term trading vehicles, the investment advisor said in the filing. The daily results correspond to the inverse of the performance of an underlying stock, it added.

See also: S&P 500 Bracing For More Pain In September? Here's What History Tells Us

Why It’s Important: A single-stock short ETF, aka inverse ETF, works by short-selling a stock to create an investment opportunity in an inverse direction to the stock. The rationale behind the instrument is to give investors options to tide over market volatility. One can go short on a single stock without having to sell it short.

Meme stocks are known for their volatility as evidenced by the recent trading in the shares of retail favorite Bed Bath & Beyond, Inc. BBBY, which went from around $5 in early August to an intraday high of $30 in mid-August, a six-fold increase. The stock has since lost more than half of its value.

Barstool Sports founder Dave Portnoy, who is an investor in casino and resort operator Penn, speculated whether the development suggests the stock would take off.

“A short $Penn etf? Can we figure out who owns Rex and does this mean we’re going to the moon?” he said on Twitter.

There were others who did not see the logic in the new investment products. When one can short a stock through options and shares, why would anyone buy a product for a fee, a Twitter user commented.

Earlier this month, Direxion announced single-stock leveraged and inverse ETFs, which would track the daily performance of Apple, Inc. AAPL and Tesla, Inc. TSLA.

Market News and Data brought to you by Benzinga APIs
Posted In: NewsPenny StocksNew ETFsSmall CapETFsDave Portnoy
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!