World's First Social Media ETF Begins Trading
The world's first ever exchange-traded fund (ETF) based entirely on social media companies began trading Tuesday but experts are warning investors
to hold off on the fund as it does not include social media darlings Facebook and Twitter. The Global X Social Media ETF (SOCL) began trading in Tuesday's session at $14.98 a share. While the fund does contain notable recent IPOs like LinkedIn, Groupon and Pandora, it lacks the two biggest names in social, Facebook and Twitter as neither company has gone public.
A number of analysts are dismissing the investment value of SOCL, calling the decision to gather social media companies into an investment vehicle "premature" and referring to the ETF as a "gimmick" launched in an attempt to capitalize on the frenzied popularity of social media firms, even though those companies have yet to demonstrate the ability to be profitable. In addition, Facebook and Twitter are considered the crown jewels of the social media sector, and their absence from the fund seriously limits its potential.
Bruno del Ama, CEO of Global Funds X, defended the decision to launch the fund without the two big names in social networking, explaining that the social media sector is growing rapidly, and investors want access now. One aspect of the fund that analysts seem to favor is its diversity, as the fund includes shares of social media companies from all over the world. SOCL tracks the Solactive Social Media Index, which consists of shares of 25 companies from a number of countries. The index contains companies based in Russia, Italy, India, Germany and the UK, as well as firms located in China, the US and Japan.
SOCL's largest US stake is in Google, which operates social media platforms Google+ and YouTube, but its weight in the index is limited since the company itself is not a purely social media investment. Despite the variety of firms represented in the SOCL ETF, most investment advisers recommend their clients stick with broader-based tech firms and funds based on them until the social media world proves it can sustain a profitable business model over time.
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