If the action on SharesPost and SecondMarket this year tells us anything, it’s that there is significant demand for social media companies among investors. But, what’s the draw? Do investors really believe in the growth potential of this sector, or are they investing in the brand? Well, we’re about to find out.
A new exchange-traded fund, Global X Social Media is set to take off, and it’s goal is to mirror the performance of social media stocks, according to the Wall Street Journal. The ETF is expected to begin trading today, and here’s what you need to know about it:
1. China: the ETF ‘offers significant exposure to Chinese internet firms’, the WSJ reports. Given the Chinese consumer internet IPOs over the past year, this doesn’t come as a surprise. Investors who think they’re getting an ETF that will give them the same risks and opportunities as Facebook and LinkedIn, however, should keep this regional focus in mind.
2. The basket: the ETF tracks 25 stocks, including LinkedIn and others that went public this year. Of course, given the weighting toward China, Tencent Holdings and Sina are in the basket. Pandora and Groupon each comprise 3.5 per cent of the portfolio, and Google is weighted to 4.75 per cent.
3. Breakdown: we know the emphasis on China, which comprises 37 per cent of Global X Social Media’s initial weighting. The US is good for 26 per cent. There are three stocks from Japan (weighted to 19 per cent). Also on the list are Russia, Germany, India, Taiwan, Italy and the UK.
4. The future: over time, according to the WSJ, the US is expected to increase in weight. This makes sense when you consider the domestic IPO pipeline, which includes Zynga, Angie’s List and (at some point) Facebook and (maybe) Twitter.