Roundhill MEME ETF to Liquidate Next Month

The Roundhill MEME ETF (MEME), an exchange-traded fund designed to capitalize on the meme-stock craze, will be shutting down, as stated by the fund's sponsor. Despite generating significant buzz in the financial press upon its launch, the fund failed to gain traction and has seen a decline in assets under management. Starting with a high of around $4.75 million in February 2023, the fund's assets have now dwindled to less than $3 million.

One possible reason for this lackluster performance could be the fund's overall return. Since its inception in December 2021, the MEME ETF has dropped by 58%. Ironically, the announcement of its closure comes at a time when the fund was experiencing one of its strongest months, with a 21.8% increase in November. However, it's worth noting that January was the only month when the fund demonstrated even higher performance.

Notably, two of the fund's major holdings, Coinbase Global Inc. (COIN) and GameStop Corp. (GME), have shown positive movement over the past five days, with increases of 17% and 32.2% respectively, according to FactSet data.

Despite these recent gains, the Roundhill MEME ETF will officially cease operations next month.

ETF Tracking the Meme Stock Craze to Close

The ETF that follows an equal-weighted index, known as the Solactive Roundhill Meme Stock Index, is set to shut down. This index consists of 25 U.S.-listed stocks that were selected based on their significant social media buzz and short interest. These characteristics were defining factors of the meme-stock craze that took hold in 2021.

The last day of trading for this ETF will be December 13th, and investors can expect to receive cash from the liquidation on the following day.

This closure is not the first of its kind. Earlier this year, another buzzy ETF that was created to invest in stocks recommended by CNBC personality Jim Cramer also closed and underwent liquidation.

The meme-stock craze originated in January 2021, when a group of stocks gained significant traction within online communities, such as Reddit's Wall Street Bets. These stocks experienced explosive gains, with GameStop shares soaring from $3 to a peak near $500 per share. However, as clearing houses demanded more capital, brokers decided to limit buy orders.

Although not as intense, similar instances of this craze have surfaced sporadically since then. One notable occurrence was in August 2022, when shares of retail chain Bed Bath & Beyond skyrocketed due to hopes that emergency financing would turn the struggling company around. Unfortunately, the retailer eventually filed for bankruptcy.