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SOCL Succumbs To Facebook Slump

Cinthia Murphy

The Global X Social Media Index ETF (SOCL)—the only social media strategy offered in an ETF wrapper today—has lost nearly 8 percent of its value in the past week alone, as investors grow disillusioned with one of the fund’s largest holdings:Facebook.

Facebook’s stock price hit another record low Thursday, dropping more than 4 percent in early trade. It is hovering around the $20-a-share mark in what is now the third consecutive day Facebook’s stock has plumbed new lows. The company’s stock value has dropped by nearly a third in the past five days alone, and it’s now more than 45 percent below its initial public offering price in May.

The weakness in Facebook has been pressuring other social media names such as Linkedin Corp, which was trading some 2 percent lower early Thursday. Linkedin had until recently been on a rising trajectory, posting year-to-date gains of more than 48 percent. But the stock has lost more than 10 percent of value in the past week, amid growing views investors are ready to turn to it after they’re done trashing Facebook.

By many measures, Facebook is seen as the poster child of the social media space, which makes its flagging performance that much more significant for an industry that is probably still in its infancy. Growing concerns of whether Facebook can maintain profitability also puts into question the fate of funds like SOCL, as IndexUniverse’s analyst Ana Kostioukova explored in a recent blog .

Other exchange-traded products that hold Facebook and Linkedin include the Etracs Monthly Next Generation Internet ETN (EIPO) and its double-exposure sibling, the Etracs Monthly 2x Leveraged Next Generation Internet ETN (EIPL), both of which have also been under significant pressure.

Facebook represents roughly 9 percent of each of the UBS-sponsored Etracs ETNs and it has a 7 percent allocation to Global X’s SOCL. Linkedin represents 10 percent of the UBS-sponsored Etracs ETNs and 11 percent of SOCL.

SOCL, which came to market last November amid enthusiasm surrounding the social media revolution, has mostly been falling since then. It has already fallen more than 17 percent since its inception.

The one-year-old thinly traded EIPO has also tagged on losses nearing 10 percent since the beginning of the year, while EIPL’s leveraged exposure has cost it almost twice as much in the same period.

Facebook’s large footprint appears to on the verge of affecting another ETF, the First Trust Dow Jones Internet Index Fund (FDN). The fund's methodology stipulates that an eligible stock must be public for three months and have an average closing price of $10 a share in that three-month period. Facebook will hit that three-month time stamp on Aug. 18.

The Dow Jones Internet Composite Index that underlies the strategy is reviewed quarterly, and additions and subtractions take place on the third Friday of March, June, September and December. That would make mid-September the earliest possible time when Facebook might enter FDN's portfolio assuming it still meets the required criteria by then, a First Trust ETF strategist told IndexUniverse.

FDN, which holds companies such as Google, Amazon and eBay, has tagged on gains of 6.2 percent year-to-date. However, the $421 million fund has also been under pressure in recent days.



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