The technology sector is at fever pitch with never-ending merger
and acquisition activities. This corner of the market is in focus
this week with another hot technology deal.
The major catalyst is
, which agreed to acquire the mobile-messaging startup WhatsApp for
$19 billion in cash and stock. As per Dealogic, the deal would be
the fourth largest in the technology space over the past decade.
Facebook-WhatsApp Deal in Focus
The deal between Facebook and WhatsApp came as a huge surprise.
Facebook is the world's largest and most popular social network
company with over 1.2 billion monthly users worldwide. Meanwhile,
WhatsApp is the mobile messaging service provider that has grown
rapidly since its debut five years ago with more than 450 million
Under the terms of the deal, Facebook will pay $4 billion in cash,
$12 billion in FB stock, and $3 billion in restricted stock that
vests over four years (read:
3 ETFs with the Most Facebook (FB) Exposure in
The deal looks to be the biggest purchase for Facebook in its
history and could boost its future growth in terms of teen
subscribers in which it is lagging. Further, the deal will help the
social media giant to expand in the fast-growing mobile messaging
market with a dominant position in Europe and India. However, the
rest of Asia will remain governed by other local messaging app
players like WeChat in China, KakaoTalk in South Korea and Line in
The Facebook-WhatsApp deal came on the heels of Facebook's failed
attempt to buy Snapchat for roughly $3 billion last year. The
transaction is expected to be completed in August should it pass
all the regulatory approvals. Upon closing, both WhatsApp and
Facebook messaging system will operate as separate entities.
The shares of FB fell nearly 3% at the close in the aftermarket
hours on heavy volume following the announcement as investors were
disappointed with the high price that FB is paying for the
However, the drop seems temporary, as the deal may boost the
company's revenue and subscriber base along with more global
expansion, in particular Europe (read:
3 ETFs to Buy on Great Facebook Earnings
Facebook is up 26% so far this year and has more than doubled over
the last year. This increasing share price indicates optimism in
the company's future growth. Further, Facebook currently has a
Zacks Rank #2 (Buy) and a solid
Zacks Industry Rank
in the top 24%, suggesting that the stock would outperform its
peers in the coming months.
ETFs to Watch
With that being said, investors could definitely ride out the surge
resulting from the deal with lower risk in the form of ETFs. Below,
we have highlighted three popular tech ETFs that are heavily
invested in this social networking giant and are poised to move
upward in the coming days (see:
all the Technology ETFs here
Global X Social Media Index ETF (
This ETF offers the only pure play in the social media space and
amassed $149.5 million in its asset base. The ETF charges 0.65% in
fees and expenses and sees good volumes of nearly 210,000 shares a
The product tracks the Solactive Social Media Index, holding 27
securities in the basket. Of these firms, Facebook takes the top
spot, making up 12.14% of assets. In terms of country exposure,
U.S. firms take more than half the portfolio, closely followed by
China (26%) and Japan (11%).
The ETF is up nearly 4.8% year-to-date and currently has a Zacks
ETF Rank of 2 or 'Buy' rating with a 'High' risk outlook.
First Trust US IPO Index Fund (
This ETF provides exposure to the booming U.S. IPO market by
tracking the IPOX-100 U.S. Index. The fund has accumulated $446.2
million in AUM and charges 60 bps in fees a year. Volume is good as
it exchanges nearly 129,000 shares per day on average (read:
Can IPO ETFs Remain Hot in 2014?
In total, the fund holds 100 securities in its basket with FB at
the top with an 11.56% allocation. The product is slightly tilted
toward consumer discretionary at nearly 26% while information
technology, energy and healthcare round off the next three spots.
FPX has added about 3% so far this year.
PowerShares Nasdaq Internet Portfolio (
This fund follows the Nasdaq Internet Index, giving investors
exposure to the broad Internet industry. The ETF holds 79 stocks in
its basket with AUM of $383.1 million while charging 60 bps in fees
per year. PNQI trades in lighter volume of less than 75,000 shares
Here again, Facebook occupies the top position in the basket with
10.54% of assets. In terms of industry exposure, Internet mobile
application makes up for more than two-third share in the basket,
followed by Internet retail (30%). PNQI is up nearly 4%
year-to-date and has a Zacks ETF Rank of 1 or 'Strong Buy' with a
'High' risk outlook.
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FACEBOOK INC-A (FB): Free Stock Analysis Report
FT-IPOX 100 (FPX): ETF Research Reports
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