It's now basically official: Meme stocks as a phenomenon are dead and obsolete. And they're just one type of investment that won't live to see 2024.
Roundhill Investments is pulling the plug on its Roundhill MEME ETF on December 11. It was the first ETF opened to capitalize on the insane interest fanned on online message boards for stocks like GameStop and AMC Entertainment.
But the closure of the Meme ETF — which barely lived long enough to see its second birthday — is just a high profile part of a radical trend in investing now. So far this year 203 U.S. ETF are closing, says Morningstar Direct. That's up 38% from the number of "obsolete" funds in 2022 and more than 180% higher than the number in 2021.
It's part of the survival of the fittest funds in a highly competitive industry, says Todd Rosenbluth director of research at Vetta Fi.
"ETF closures are healthy," he said. "They close based on lack of demand and are often replaced with strategies that have a better chance to meet investor objectives."
No One Will Miss Meme
The Roundhill Meme ETF is clearly an idea whose time has passed. That's certainly the reason for closing it.
The ETF's assets shriveled to just $2.7 million, says Morningstar. That means the administrator is only pulling in roughly $18,630 annually to manage it, based on the annual expense ratio of 0.69%. That's not enough to cover the costs of running most funds.
But it's been a loser for investors, too. Anyone who bought the Meme ETF on its first day closing price on Dec. 8, 2021 lost 58% of their money. And that's despite the ETF adding new positions that are working better. For instance, it added under-the-radar AI winner Super Micro Computer, which is up 553% since the ETF's inception.
That's simply not enough, though, to make up for the fund's disasters. AMC Entertainment, one of the original Meme ETF stocks is down 98% from the fund's inception. And GameStop, the posterchild of the meme stock phenomenon is down 69% from December 2021. More than 80% of the Meme ETF's current positions are lower now than when the fund opened.
Dead ETFs Jump In 2023
| Year | # of "obsolete" ETFs |
|---|---|
| 2018 | 115 |
| 2019 | 124 |
| 2020 | 261 |
| 2021 | 72 |
| 2022 | 147 |
| 2023 YTD* | 203 |
Source: Morningstar Direct
ETFs Shutting Down Fast
Closures of ETFs is to be expected in a year like 2023. Just a handful of dominant U.S. companies, like Microsoft and Amazon.com, drove the S&P 500's gains for the whole year. Many other themes and quirky angles on the market simply failed to pan out.
A number of ETFs designed to help investors put money to work outside of the U.S. closed up as domestic large-cap stocks continue to dominate. Simplify shuttered a specialized emerging markets ETF and also an ETF focused on the developed world minus the U.S.
iShares pulled the plug on a German small-cap ETF, which is about the furthest thing from what investors are looking for now. It also turned off ETFs that took specialized approaches to investing in the United Kingdom and Canada. WisdomTree shut down Germany and India ETFs, too.
Some other fad investments hit the skids, too. Tuttle canceled the Long Cramer ETF designed to follow the moves of TV personality Jim Cramer. And while climate change is an ongoing issue, ESG is fading. Strategy Shares unplugged its Halt Climate Change ETF. Meanwhile, NightShares said good night to its NightShares 500 ETF and NightShares 2000 ETFs it said would help investors profit from after-hours trading trends.
The big ETFs are still alive and well, thought. Assets in SPDR S&P 500 ETF Trust hit $427.2 billion and more than $220 billion sits in Invesco QQQ Trust. It's clear that ETF investors, at least, had their fill of some gimmicks in 2023. And that includes meme stocks.
Worst Performers In Roundhill Meme ETF
Since first-day close on Dec. 8, 2021, based on current holdings
| Company | Ticker | Ch. |
|---|---|---|
| AMC Entertainment | -97.7% | |
| Lucid Group | -90.2 | |
| Plug Power | -89.5 | |
| Carvana | -88.2 | |
| Upstart Holdings | -86.5 | |
| Rivian Automotive | -85.7 | |
| QuantumScape | -78.2 | |
| Affirm Holdings | -74.4 | |
| Marathon Digital Holdings | -73.5 | |
| GameStop | -68.9 |
