Horizons lists blockchain trackerMirae-owned Horizons ETF is adding to North America's list of blockchain ETFs, listing a fund that buys companies that use blockchain as well as those that provide cryptocurrency mining hardware. The Horizons Blockchain Technology & Hardware Index ETF (BKCH) will track the Solactive Blockchain Technology & Hardware Index.
The index uses a tiered methodology that gives one-third weighting to each of the following types of company:
- Companies that focus on developing cryptocurrency and blockchain
- Semiconductor producers
- Companies that provide the "relevant hardware" for "large-scale mining on a commercial level", the prospectus says.
Analysis - index trolling: the interesting story of Riot BlockchainThe most heavily weighted company in BKCH is Riot Blockchain (RIOT), the index fact sheet says. Riot Blockchain - formerly called Bioptix, which was nominally a biotech startup - rose to notoriety for changing its name in the middle of last year's bitcoin boom. The name change and its timing caused RIOT's stock price to quadruple in the space of two months, before sinking back down three months later. The company's curious renaming caused it to be subpoenaed by the SEC, which believed it had made misleading claims on its filing documents.
The incident is not unique either. Beverage maker Long Island Ice Tea Corp renamed itself Long Blockchain in December 2017 and saw its share price skyrocket 300%. Despite the company saying its central business would carry on making long island ice teas. (Nasdaq forced it to delist in April, but only after investors had lost millions.)
What these examples show is that companies know that adding "blockchain" to their name and public documents can cause their share price to rise. They know that index construction and stock selection in this day and age relies heavily on automated processes, like keyword searches. Seeing this, some companies are happy to game the system.
Which leads us to some questions about this ETF: how will it pick blockchain companies? And how will Solactive and Mirae deal with companies trolling stock selection? Will Solactive spend hours analysing potential blockchain companies, as ROBO Global does for its robotics and AI index? Or will it leave index construction almost entirely automated?
It's a difficult situation. Given the paucity of pure play publicly listed blockchain companies, analysts and indexes have little choice but to use publicly available filing documents. And here, alas, there is plenty of scope for trolls. It will be interesting to see how - if at all - BKCH gets around this.
Sinhuan Investments is listing two ETNs. They are:
- Shinhan Investment Shinhan Leverage USD Futures ETN 35 (500035)
- Shinhan Investment Shinhan Inverse 2X USD Futures ETN 36 (500036)