It's stating the obvious, but Facebook's (Nasdaq:
) IPO is bound to have an impact on multiple fronts. Not only
will it make founder Mark Zuckerberg and some of his employees
very, very wealthy, the company could be sporting a market cap
that is higher than about half of the companies in the Dow Jones
Industrial Average when the shares commence trading on
The Facebook IPO
will also have a profound impact on some ETFs
with the obvious candidate on this front being the Global X
Social Media Index ETF (Nasdaq:
Benzinga previously reported SOCL and the idea of
the Facebook IPO have been joined at the hip
since the social media first announced plans to become a public
company. Whether or not the Facebook IPO provides some sort of
validation for SOCL or whether or not the ETF even needs it is up
The key for SOCL going forward will be whether or not the fund
proves to be a credible avenue for accessing Facebook shares
without owning the stock directly and whether the ETF
accomplishes its goal of delivering exposure to the fast-growing
social media industry. In a wide-ranging interview with Benzinga,
Global X CEO Bruno del Ama taled about the Facebook IPO and how
it could impact SOCL.
"Nobody doubts Facebook is a special company," del Ama said in
the interview. "It's a great company, but the question is is it a
good investment? We view social media as a business with a
significant moat and barriers to entry."
It is clear Facebook's IPO plans have boosted SOCL's
superficial statistics. The fund, which debuted in November 2011,
is now home to almost $16 million in assets under management and
sees average daily volume of over 36,000 shares. Both numbers are
exponentially higher than were they were as recently as February.
del Ama acknowledged SOCL has seen consistent growth in AUM and
volume leading up to the Facebook IPO.
When SOCL first debuted, it was criticized by some for its
niche focus on a new, arguably complex industry and the
had few vocal supporters immediately following
. Those days appear to have passed as some financial advisors
have started embracing SOCL as a way of tapping into the
burgeoning social media industry, according to del Ama.
"Advisors have clients that are on Facebook. Their kids and
their grandchildren are on Facebook and they're seeing SOCL as a
great vehicle for getting into the stock while avoiding the
volatility of the first few trading days," del Ama said.
No one knows for sure just how wild or boring Facebook shares
will be over the first days of trading, but the stock will be
added to the Solactive Social Media Index, the index tracked by
SOCL, on May 24 and the ETF will reflect that addition on May
del Ama said waiting five days to add Facebook to SOCL allows
for better price discovery and achieving a share price that's
more reflective of Facebook's long-term prospects. Based on the
current expected size of the Facebook IPO, del Ama said the stock
will probably come in at 10% of the index's weight. Currently,
) is SOCL's largest holding with an allocation of almost 12%.
China's Tencent Holdings receives a weight of almost 10.2%.
SOCL's index rebalances on a semi-annual basis. Bottom line:
Facebook will be a force in SOCL and a primary driver of the
ETF's returns going forward.
Acknowledging that Global X was early to the social media ETF
game (the fund is still the only pure play ETF on the industry),
del Ama sees advantages in that early arrival.
"We think we're early on the social media stage, but as these
companies scale down expenses, we think we're going to have cash
cow businesses that are basically monopolies," he said. "We
offered SOCL to provide access to a segment of the capital
markets that we think will do well over the long-term. Social
media is one of those segments."
While shares of SOCL have fallen 7.4% in the past month,
volume has remained high and is more than triple the daily
average today. To say SOCL's performance over the next week will
be interesting to watch is an understatement, but the fund has
honored support at $14, indicating it could be worth a nibble on
the back of the Facebook IPO.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.