A social media ETF that counts Facebook (NasdaqGS: FB) as its third-largest holding is down 16% the past month amid the fallout of the IPO bomb.
Global X Social Media Index ETF (NasdaqGM: SOCL) has 7.8% of its portfolio in Facebook. The ETF is relatively small with about $18 million in assets.
Facebook shares have tumbled to below $27 after hitting a high of $45 in the IPO on questions over the company’s profitability and ad-driven revenue.
“Facebook is building the foundation to revolutionize online advertising. However, lack of near-term visibility and cloudy advertising metrics may temporarily stall revenue and profit growth,” says Morningstar analyst Rick Summer in a note.
“People spend more time on Facebook than any website on the Internet. By collecting information about users, their social connections, and their activities on the Internet, Facebook has a lucrative database that is highly valuable to advertisers,” he added. Still many of the company’s advertisers “are unsure if they are spending money wisely on Facebook ads today.”
Facebook shares were added to the social media ETF in late May. [Facebook Enters Social Media ETF]
As the stock continues to fall, investors are trying to figure out at what price Facebook becomes a compelling value play.
“Facebook is the largest social network in the world with more than 900 million monthly active users,” according to Trefis. “Facebook made a net profit of close a billion dollars in 2011, which is expected to grow further going forward.”
Global X Social Media Index ETF
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