Last month, Barron reported that Facebook will likely join the widely watched Nasdaq 100 and the $30 billion PowerShares QQQ (QQQ) as soon as the end the fall. Futhermore, analysts expect Facebook to become “friends” with the iShares Russell Top-2oo Index Fund (IWL), Russell Top-200 Growth Index Fund (IWY), plus the funds tracking the Russell 1000 (IWB, VONE), and the Russell 1000 Growth (IWF, VONG) at the next rebalancing, in late June. With regards to the Standard & Poor’s 500 index, Facebook should be much slower in joining the index and will likely follow Google with an 18 month waiting period.
With the difficulties in Facebook joining an index, they will likely look to join an ETF in the near future. Two ETFs that should “like” Facebook are Global X Social Media ETF (US:SOCL) and First Trust US IPO Index (US:FPX). Launched last November, the Global X Social Media Ind. ETF tracks the equity performance of the largest and most liquid companies involved in the social media industry, including companies that provide social networking, file sharing and other web-based media applications. This ETF is not for the faint-hearted. Price volatility is well above average relative to North American equity indices. Since launch, the fund has traded in a range between $12.50 and $16.00
Finally, Facebook will look to join the Nasdaq 100 when it is eligible for acceptance. Originally, a company had to trade for two years, but recently, NASDAQ slashed their requirments and now only requires securities to trade on the NASDAQ, NYSE, and NYSE AMEX for at least three full months. Assumably, this move is to allow Facebook to join the index earlier than previously allowed.
Will Facebook be a good buy at $28? Only time will tell.
Contributor Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com
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