Will Hershey is playing hardball. He flat-out rejected $100,000 and shrugged at $250,000. Fine, I say. What if someone offered you $500,000?
"Hold on," he says. "Let's take a step back. I don't own the ticker."
Wait, what? That's not what I've heard.
It's late spring in New York, and the latest bout of Reddit-fueled craziness has hit the market. A source tipped me off that Roundhill Investments — Hershey's firm — is sitting on surely one of the hottest assets on Wall Street: It owns the ticker MEME, and is just deciding how to cash in.
"We have it reserved at an exchange," Hershey says. "It's not ours to sell."
Which is a shame, because a good ticker — the set of letters under which a security trades — is a rapidly appreciating commodity. In fact, Hershey had already been approached late last year by a company offering $250,000 for another of Roundhill's. So I got curious about what it would take for someone to pry MEME from his grasp.
In the end, nothing would. The firm this week filed to slap the ticker on its own ETF, one that will screen stocks for social media activity and short interest. Turns out these four letters were too precious to part with.
That's understandable. Research shows stocks with tickers that are actual English words enjoy advantages like lower spreads and greater liquidity. But crucially, they're also more popular with less-sophisticated investors.
It's a potential game-changer now the retail crowd is driving as much as a quarter of U.S. equity trading volume, and a behavioral quirk that's especially important for funds.
While the nature of a company easily defines a stock, one big basket of shares can easily look a lot like the next. But add a catchy or memorable moniker, and you get the Invesco Solar ETF (ticker TAN) with more than $3 billion in assets. Take it away, and you have the VanEck Vectors Solar Energy ETF (KWT), which was long ago liquidated after luring just a few million.
To win a slice of the record billions pouring into the saturated $6.7 trillion U.S. ETF universe, therefore, a ticker is all-important.
So I persevere with Hershey. You could agree to a price, I say, and Roundhill can drop the ticker and the buyer can reserve it a second after it does. Although I suppose that would create a millisecond risk of someone stealing it.
"Yeah," says Hershey with a chuckle. "The high-frequency ticker-reservation guys."
The Gray Market
At law firm Morgan, Lewis & Bockius LLP, Laura Flores specializes in the regulation of investment vehicles. She's who you call if you want to get your ETF registered, and helped turn the concept behind MEME into the filing that landed with the Securities and Exchange Commission on Thursday.
I explain my MEME plan to her, and ask if it's feasible. She describes it as "technically" legal — which is good enough for me — and intriguingly, says it's not such an unusual request. Unsolicited approaches for tickers are likely becoming more common.
"It's probably still kind of a minority situation," Flores says. "Now that we're getting into more thematic ETFs where that ticker becomes even more important and recognizable, I think we're going to see that activity increase."
An ETF-ticker gray market, fueled by the thematic investing boom? It seems fanciful, considering the complex cocktail of ingredients that combine to make or break any fund. Yet this is a niche where fees and distribution take a back seat to visionary ideas and persuasive pitches.
These ETFs, which target hot trends like robotics or electric vehicles, have amassed roughly $165 billion in assets — up from below $50 billion in 2016. That's why this year we've welcomed everything from CRUZ and BOAT to KROP and TRYP.
"As we've seen an increase of retail trading and investors come into the market, there certainly has been greater appetite for firms — including ourselves — to try and gain access to tickers that may fit in the memorable category," says Dave Mazza, head of product at ETF issuer Direxion.
To date no one has tried to buy a live ticker from him, "but I do know there are back-channel conversations about if someone might have a ticker that you think you might want, is there a possible swap," he says.
Direxion has been well-placed to surf the thematic wave thanks to products with funky tickers like MOON, WFH and GUSH. But Mazza reckons it's getting more competitive, and not just because of the fund boom.
"Because there's been so many IPOs and SPACs, many unique or consumer companies, they've taken a lot of great tickers," he says. Among the stand-outs he cites is COIN, which drew cryptocurrency exchange Coinbase Global Inc. to list with Nasdaq Inc. because the ticker wasn't part of the NYSE pitch.
Roundhill is also part of the thematic boom. Having launched in mid-2019, it now oversees about $700 million and has some of the most memorable tickers in the business, including BETZ, NERD and DEEP.
The bid it received out of the blue was from a company preparing to list publicly. They approached Roundhill and made the offer for one of their live tickers.
This is a thornier situation, according to Flores. Issuers have a duty to their investors not to give away the store, so an existing fund's ticker is not so easy to buy and sell.
