A week after one of the most infamous initial public offerings in history, Facebook quietly made its first debut in the ETF world yesterday, as the third-biggest holding of the $25 million Global X Social Media Index ETF (SOCL - News).
Facebook has a potential to radically reshape small funds such as SOCL, which tracks publicly traded social media companies. In SOCL for example, Facebook has an 8.79 percent weighting, behind first-place LinkedIn and Tencent Holdings.
However, many investors may be worried given Facebook’s belly flop of a launch. The company’s price has fallen 17 percent from its $38-a-share IPO price to $31.52, according to Google Finance. In addition, the market cap of the company has declined to $67.16 billion from an initial market cap of about $104 billion.
More trouble could be on the way, as Facebook is facing a host of investor lawsuits over its allegedly mispriced IPO.
However, the downdraft after the botched IPO may not necessarily hurt investors, because much of the drop may have already occurred and the stock’s price may now be more reality based.
Pumping Up Assets
Investors in SOCL certainly don’t seem to be concerned and, although SOCL’s price has been flat for the past five days at $13.26, the Facebook launch has done wonders for the fund’s assets.
On May 17, the day before the Facebook launch, the fund had $18.0 million in assets. But as of May 23, the day before the fund was to be listed in the fund’s underlying index, SOCL was up to $25 million, where it remained yesterday.
In the next couple of weeks, the social networking giant should be incorporated into the $6.2 million Etracs Next Generation Internet ETN (EIPO - News) and the $2.9 million Etracs 2X Next Generation Internet ETN (EIPL - News).
Facebook And The 'Q’s'
However, the fund’s potential weighting in that ETF is uncertain because the underlying Nasdaq index bases its weighting on the value of the shares issued, and not the value of the company.
That means that with the value of Facebook’s newly public shares falling precipitously—some analysts say the stock could hit $28 a share or even lower—the company’s already-small place in QQQ could dwindle even more.
Assuming the $10 billion market value of the new public float, Facebook would be added to the Nasdaq 100 and the “Q’s” at about 0.33 percent of the portfolio.
Again, that weight will drop as Facebook’s shares do—which means investors in the Nasdaq 100 ETF will be getting even less Facebook than they first thought—and a whole lot less than in a more concentrated fund like Global X’s SOCL.
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