By Jared Cummans
The Facebook IPO is coming, and it will certainly have a major affect on some popular exchange-traded funds. But ETFs will also offer a way to make a play on Facebook as they will surely include the company after it goes public. After seeing some of the hefty volatility that newcomers like Groupon and Zynga endured, many investors may feel more comfortable with a diversified play utilizing an exchange-traded product. Below, we outline three ETFs that could be impacted by Facebook.
PowerShares QQQ (QQQ)
This ETF replicates an index that includes the 100 largest non-financial components of the Nasdaq. With over $26 billion in assets and an ADV topping 35 million, QQQ is the seventh largest ETF in the world and ranks fifth by daily volume. With QQQ utilizing a cap weighting structure, Facebook could easily make its way into the top ten holdings if the company lists on the Nasdaq because the predicted $100 billion+ valuation will put it above several of QQQ's largest allocations. Note that buying into QQQ prior to the IPO could make for a safer way to play what will likely be a volatile debut for Facebook [see also ETFs: The $10 Billion Club].
Social Media Index ETF (SCOL)
This one is a no-brainer. Tracking an index that measures the equity performance of the largest and most liquid companies involved in the social media industry, Facebook will surely get a large representation in this ETF. Considering that Google is the only top holding (ranked 7th) with more than $100 billion in market cap, it would not be surprising to see Facebook overtake the number one holding. While it may not be bigger than Google on debut, it is a pure social media site and will dwarf the other holdings of this young ETF.
Nasdaq Composite Index Tracking Stock (ONEQ)
ONEQ tracks the Nasdaq Composite Index, which measures all Nasdaq domestic- and international-based common type stocks listed on The Nasdaq Stock Market. This yields top holdings like Apple, Microsoft, Google, and a number of others. While Facebook is not big enough to take the top slot of this fund, it would likely secure a spot in the top ten, and hold a significant weight for the overall product.
Jarad Cummans is a writer at ETFdb. ETFdb offers a comprehensive and original ETF database and analytical consulting services for advisors and investors, as well as a free newsletter. Learn more about their services by visiting ETFdb.com. Disclosure: No positions at time of writing.