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(Bloomberg) — Single-stock exchange-traded funds made a splash in the industry when they debuted last year. Now one issuer is hoping to double the existing lineup.
GraniteShares is looking to launch 32 new funds focused on providing investors leveraged daily exposure to certain companies, according to a Tuesday filing. The number is roughly equal to the current total of all single-company ETFs in the US, which clocks in at around 30, according to a database tracked by Bloomberg Intelligence’s Henry Jim. The issuer is looking to debut such funds focused on American Airlines Group Inc., Apple Inc., Coinbase Global Inc., Meta Platforms Inc., Tesla Inc. — as well as a few other auto companies — among others.
“I’m not shocked — when these products were able to get approved to be launched, I felt like this was going to happen, and I think potentially it’s just the beginning,” Jillian DelSignore, managing director and head of strategic growth and solutions at FLX Networks, said in an interview. “Given the number of equities that are trading, especially ones that people are actively trading daily, I do think this could potentially be much higher.”
Jim added that “the lineup looks focused on high-turnover stocks so perhaps positioning to be a trading vehicle rather than an investment vehicle. The leverage amounts are a bit stunted (1.25 times, 1.75 times, etc.) but that is probably due to regulatory constraints on how allowed leverage is calculated.”
Companies GraniteShares are targeting, according to filing: American Airlines, Apple, Advanced Micro Devices, Coinbase, JPMorgan Lucid, Meta Platforms, NIO, Nvidia, Rivian, Tesla, Exxon Mobil
These types of funds were expected to be the next hot thing in the ETF space when they debuted, though the majority of investor money so far has gone into funds focused on Tesla, specifically. The 90-day volatility on Elon Musk’s electric-vehicle maker — though off its recent highs — clocks in at about 65%, compared with Apple’s 24% and JPMorgan’s 28%, two other companies mentioned in GraniteShares’s filing. Yet, such readings for other auto companies focused on by the issuer, including Rivian Automotive Inc. and Lucid Group Inc., clock in at 78% and 100%, respectively. Coinbase’s 90-day reading is above 113%.
Of the hundreds of millions in assets that flowed into single-stock ETFs between July and the end of March, the bulk of that haul sat in those tied to Tesla.
“It’s popular right now — whether they’re on one side of the trade or the other, they’re interested in that name,” said DelSignore.
Some of the new GraniteShare ETFs could see success if they launch, as certain investors may be drawn to the volatile carmakers that some of the funds are focused on, she added.
Meanwhile, one issuer is looking to launch double-leveraged Tesla ETFs that would provide twice the daily returns as well as the inverse of that, though attempts at such a product have not made it past regulators in the past.
Leveraged single-stock ETFs debuted last year, even as US Securities and Exchange Commission officials sounded the alarm. SEC Chair Gary Gensler said the products “present particular risk,” while Commissioner Caroline Crenshaw called for the agency to adopt new rules that would address potential dangers.
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