After Twitter’s smashing debut yesterday on the New York Stock Exchange when it exploded 73 percent from its $26 IPO price, you can’t blame investors for being wary about the nosebleed valuation affixed to a company that has yet to earn a dime. At the same time, it is understandable why investors are intrigued about the social media company’s long-term potential.
Twitter could be a volatile stock in the near term while it tries to prove its business model can be profitable, but one way to play it without directly owning it and fully exposing yourself to that potential volatility is by investing in an exchange-traded fund with a stake in Twitter.
Twitter will not be featured in any ETFs during its first few trading days, but we highlight below which ETFs will likely make big allocations to Twitter and when investors can expect these ETFs to add the company to their portfolios.
Global X Social Media Index ETF (SOCL)
Debuting in November of 2011, Global X’s SOCL was the first-ever ETF to target social media companies. Given its targeted focus, it should come as no surprise that Twitter will likely become a component stock. Currently, SOCL’s top holdings include Tencent Holdings Ltd., Sina Corp., LinkedIn, Facebook, Pandora, Groupon, and Google.
SOCL’s underlying Solactive Social Media Index will include new IPOs after just five trading days, meaning that Twitter should be included in SOCL within about a week of the IPO.
Renaissance IPO ETF (IPO)
This fund was launched in October by Renaissance Capital, and is linked to the Renaissance IPO Index designed to hold the largest, most liquid newly listed domestic IPOs.
Like SOCL, the fund is expected to include new companies on the fifth day of trading, meaning it will also be one of the first ETFs to hold Twitter. Once Twitter is included in the fund, it will be removed after it has been publicly traded for two years. Currently, the fund’s portfolio includes Facebook, Michael Kors, Workday and Zoetis.
First Trust US IPO Index Fund (FPX)