Facebook, which has lost more than half of its value in the past
three months, might have lost its image as social media's wonder
child, but the company is still large enough to be eligible for
inclusion in the Nasdaq 100 Index as early as September.
Having Facebook added to the index would affect at least eight
ETFs-with combined assets of more than $35 billion, the biggest of
which is the $34 billion PowerShares QQQ Trust (NasdaqGM:QQQ),
according to data compiled by IndexUniverse.
As of now, the Global X Social Media Index ETF (NYSEArca:SOCL)
stands as the only ETF to serve up exposure to Facebook, with a 7.3
percent allocation. The ETF currently has $13.9 million in assets.
Two UBS ETNs, (NYSEArca:EIPO) and its double-exposure cousin
(NYSEArca:EIPL), hold a 9 percent allocation to Facebook.
No one is commenting on whether Facebook's entry into the broad
technology index is indeed looming, as some index firms call these
additions/deletions "material" information, and Nasdaq itself
hasn't been readily available to comment.
But what's at stake here is that despite investors'
disappointment with the stock, they might soon find it among their
holdings. It remains to be seen how that would affect their
Many market participants seem to be quick to suggest that social
media may have seen its better days.
That view that was reinforced by a Wall Street Journal article
Monday that argued investors are bailing out on another player in
the space, Groupon-a sign they are losing faith in companies that
were expected to "drive a new Internet boom."
On Monday, Facebook shares tagged on gains of more than 4.5
percent, putting it at the $20-a-share mark. But the relatively
strong performance on a day when the Dow Jones industrial average
was trading marginally lower failed to detract from the fact that
many think Facebook has fallen from grace. Moreover, it was down 2
percent on Tuesday, as the market moved higher.
When it first went public, its IPO was touted as the biggest in
Internet history, with a market capitalization of over $100
billion. Three months into it, the company's market cap today is
pegged at just under $43 billion.
Nasdaq Rule Change To Welcome Facebook
Back in April, Nasdaq changed its "seasoning rules" to its
most popular indexes, including the Nasdaq 100, in a move that was
said to be targeted at speeding up Facebook's entry into the
The new rules, effective April 23, shortened the period of time
to three months that companies must be trading on the Nasdaq or the
New York Stock Exchange before they are eligible for inclusion in
the Nasdaq 100 Index (NDX).
Previously, companies that ranked in the top 25 percent of the
index by market capitalization had to wait a year before they were
eligible for the index, and all other firms had to wait two
That would make Facebook eligible for inclusion as early as
September, though its actual addition to the index wouldn't likely
happen until December.
That's because Nasdaq traditionally rebalances its Nasdaq 100
index in December based upon the price of a security as of the end
of October and on the total shares outstanding as of the end of
Aside from QQQ, the rebalancing would land Facebook stock into
such funds as the $85 million First Trust Nasdaq 100 Equal-Weighted
ETF (NYSEArca:QQEW) and the $185 million Fidelity Nasdaq Composite
Tracking Stock ETF (NYSEArca:ONEQ), as well as into a handful of
ProShares leveraged and inverse strategies totaling $1.4 billion in
combined assets that are linked to the Nasdaq 100.
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