By Bansari Mayur Kamdar and Suzanne McGee
(Reuters) - Roundhill Investments announced the closure of its exchange-traded fund tracking the performance of meme stocks nearly two years after its launch, putting another nail in the coffin of the popular pandemic-era trade.
The Roundhill MEME ETF, with net assets of just $2.7 million, consists of companies that exhibit a combination of elevated social media activity and high short interest, according to Roundhill's website.
It emerged out of the so-called meme stock phenomena of early 2021, when retail investors banded together in online forums and helped spark wild rallies in the shares of heavily-shorted companies such as AMC and GameStop (NYSE:GME), costing bearish hedge funds billions of dollars.
Roundhill ETF's top holdings Coinbase (NASDAQ:COIN) and Affirm Holdings (NASDAQ:AFRM) have risen over 200% each so far this year, supporting the 37.1% climb in the fund's year-to-date.
However, the fund is down 57% from its December 2021 debut as the euphoria around meme stocks cooled last year in the face of rapidly rising interest rates.
"The marketplace decides what survives and what doesn't," said Dave Mazza, chief strategy officer at Roundhill. "The meme ETF was attempting to capture a zeitgeist" and the market's focus shifted to products that offer stability and safety, he said.
Net retail inflows to the broader market stand at $254.74 billion so far this year, after hitting a record of $301.36 billion in 2022, data from Vanda (NASDAQ:VNDA) Research showed.
Meme stocks, however, have struggled, with U.S. interest rates at multi-decade highs and the S&P 500's gains concentrated in the shares of a handful of megacap companies.
Shares of AMC, for example, are down 98% from a record high hit in June 2021.
"There's just not a lot of interest here in this theme, the trading volumes are thin," said Dennis Dick, market structure analyst at Triple D Trading.
"A lot of these people came into these storied stocks that really didn't have good fundamentals and they got burned really bad. And those people may never come back."
The MEME ETF is expected to cease operations, liquidate assets and distribute the liquidation proceeds to shareholders of record on or about December 14, 2023.