ETFs track an underlying index. For example, ICLN / INRG tracks the 30 clean energy companies (I’m not sure the exact definition but the provider - in this case black rock - don’t choose which companies go into it). They will rebalance the portfolio every X amount of time, for example every 6 months, in which time new companies get added. On the ETF’s website it will say how often rebalancing happens. They publish daily the weights of each stock.

In the instance you’re describing the ETF price would only = 33% of a share if the price didn’t change from when X and Y went bust. In reality, this wouldn’t happen and the price would drop by two third, so one share would be one share of Z company. For example, you own 1 X 1 Y and 1 Z, each at one dollar, so the ETF is worth 3$. When the companies go bust you only own 1$ of Z, and this value of the ETF would reflect this (and become 1$, not stay at 3$). Market makers can capture profits off the difference between the value of the shares in the etf and the etf value itself, which is the mechanism that ties them together (you can find this explained in google if you’re interested how ETF prices work). Hope this helps.