ETF Options to Gain Indirect Exposure to Facebook
January 28th 2011 at 2:00pm by Tom Lydon
While Facebook won’t be issuing a IPO anytime soon, you can still use exchange traded funds (ETFs) to get some indirect exposure to it.
If you’re not an investor with the requisite $1 million in net worth to invest in private shares, don’t be sad: you can still get your Facebook fix by investing in companies that are tightly aligned with the social networking phenomenon.
Microsoft. Microsoft (NASDAQ: MSFT) holds a 1.6% stake in Facebook and serves as an ad-serving partner. Microsoft beat out Google (Nasdaq: GOOG) to use Bing as the search engine of choice for Facebook, writes Remi Alli for Investopedia.
- Software HOLDRS (NYSEArca: SWH). MSFT is 17.6%, the largest allocation to the company that can be found in an ETF
- iShares North American Technology (NYSEArca: IGV): MSFT is 9.5%
Retailers. A 2008 Rosetta study shows that 59% of 100 popular retailers have Facebook pages to advertise their brands. Once there, retailers find that it’s easy to reach an engaged audience and, in turn, drive them to their stores.
- SPDR S&P Retail (NYSEArca: XRT) is a natural beneficiary of this; Wal-Mart (NYSE: WMT), J. Crew (NYSE: JCG) and Nordstrom (NYSE: JWN) are just a few of the major brands successfully reaching fans through Facebook. All of these companies and more can be found in XRT.
Competitors. Investors may also invest in the competitors of Facebook. That’lll be easier once LinkedIn goes public with a possible value of $3 billion. The argument goes that an increase in the social media market could raise the market for all competitors within the whole industry. Other IPOs hotly anticipated to happen this year include Twitter, Skype, Zynga and Groupon.
SharesPost, a private equity market, currently values Facebook at around $12 billion and the projected worth could be more than twice that once the company goes public. CEO Mark Zuckerberg has commented that the company will eventually go public. Once that happens, going the indirect route may be a distant memory.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.