Social Media ETF Falls as Groupon Weighs

November 22nd at 2:43pm by Tom Lydon

An exchange traded fund that invests in “social media” stocks was down more than 1% on Tuesday as a position in Groupon (NasdaqGS: GRPN) weighed on the sector ETF.

Global X Funds launched the first ETF targeting the social media sub-sector earlier this month, and it has met a frosty reception in some press reports. One financial advisor called the new ETF a “gimmick” that’s capitalizing on a trend even though social media companies have shaky profit records, CNNMoney reported.

Global X Social Media Index ETF (NasdaqGM: SOCL) tries to reflect the performance of the Solactive Social Media Index, which tracks companies engaged in the social media industry, including companies involved in social networking, file sharing and other web-based media applications. [Global X Launches Social Media ETF]

The social media ETF has 5.1% in Groupon.

“As the industry continues to expand through IPOs, the index will capture these new companies shortly after their public debut, providing a relatively cost effective way to gain exposure to the social media industry,” said Bruno del Ama, chief executive officer of Global X Funds.

SOCL includes initial public offerings Groupon (NasdaqGS: GRPN), LinkedIn Corp (NYSE: LNKD) and Pandora Inc. (NYSE: P).

The ETF’s tracking index had 36.9% in China as of Nov. 8 — the largest country weighting, followed by the U.S. at 26.3% and Japan at 19.5%.

Among SOCL’s top holdings, Netease.com (NasdaqGS: NTES) is 11.1%, Tencent Holdings is 10.2% and Sina Corp. (NasdaqGS: SINA) is 9.4%.

“This is a global fund; social media is expanding rapidly around the world, even though people often consider social media a U.S. phenomenon,” the CEO of Global X told Benzinga. “China has 50% more internet users than the U.S., despite only having an internet penetration rate of around 37% compared to the U.S.’s 78%.  This is part of the reason that China is represented significantly in the Fund, combined with the fact that the major U.S. social media companies are still private. This ETF is specifically designed to capture the global aspect of social media, which is often overlooked but clearly should not be ignored.”

After plunging almost 15% on Monday, the newly minted Groupon shares continued to fall Tuesday, declining 10.7% at last check and dipping dangerously close to their original $20 IPO price as LivingSocial, Groupon’s main competitor, announced deals for Black Friday shopping.

“Groupon is not doing much for Back Friday, so LivingSocial may take customer attention and business away from Groupon,” Edward Woo, an analyst at Wedbush Securities, said in a Reuters report.

Because it invests in recent IPOs, investors should expect volatility in the social media ETF.

Groupon


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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.

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