Opendoor’s Meme-Stock Moment Puts These ETFs In The Hot Seat - Schwab Fundamental U.S. Small Company ETF (ARCA:FNDA), Opendoor Technologies (NASDAQ:OPEN)

Opendoor's Meme-Stock Moment Puts These ETFs In The Hot Seat

Zinger Key Points

Opendoor is held in a handful of small-cap ETFs, as analysts remain apprehensive of its meme-stock nature.
Nonetheless, high short interest and retail-driven movements could spill over into these ETFs, making them more volatile.
See the 6X seasonal strategy set to target this fall’s biggest opportunities. Details here →

Opendoor Technologies Inc OPEN became the latest retail-trading flashpoint, having rallied over 500% in two months before plummeting on poor guidance and an unexpected CEO departure. Although fundamentals of the company remain uncertain, the volatility of the stock has consequences for the ETFs that are invested in it.

OPEN stock is up over 40% in the past five days. See the price action live here.

Meme-Stock Mechanics Meet ETFs

The recent rally in the stock was fueled in part by high short interest and sustained by retail fervor on social media. The trend echoes the 2021 GameStop saga when retail strength triggered hard squeezes that spilled over into ETF performance.

For ETFs, the impact can be subtle but significant. In small-cap or thematic funds such as SCHA, ISCV, or VTWO, where there is already high volatility, meme-stock reversals could add more significantly to day-to-day returns.

ETF Exposure

ETFs have not yet opened their doors to Opendoor. The largest individual holder was Vanguard Real Estate Index ETF VNQ, which held approximately 21.9 million shares, as per ETF.com. However, the fund has dumped the shares in recent weeks and contains negligible to no holdings in Opendoor.

Other small-cap and real estate funds that hold Opendoor with exposure are the Invesco RAFI US 1500 Small-Mid ETF PRFZ, the Schwab Fundamental US Small Company ETF FNDA, and the Schwab U.S. Small-Cap ETF SCHA. However, the percentage of holdings in each of these ETFs is below 1%.

Implications For Investors

Analysts are still wary. The recent downgrades by firms such as Keefe, Bruyette & Woods, that have maintained price targets of as low as $1 due to sluggish demand and delayed profitability, are testament to this sentiment. As long as Opendoor maintains retail interest, however, ETFs that hold the stock will be susceptible to meme-like volatility. The good thing is, there aren’t many ETFs betting meaningfully on the stock as of today.

Read Next: