You can certainly understand why some exchange traded fund providers like to tap into a hot investing theme: If the stocks are generating a lot of interest among investors, then a basket of stocks might generate even more. However, the timing of the Global X Social Media Index ETF is a little off.
Timed to tap into the social media craze, the fund was launched on Nov. 15 and boasts exposure to 25 companies, including Groupon Inc. , LinkedIn Corp. , Pandora Media Inc., Russia’s Yandex NV, China’s SINA Corp. and Google Inc. – many of which debuted on U.S. exchanges this year, following high-profile initial public offerings and big jumps in their share prices when trading began.
Unfortunately, early enthusiasm among many of these names has cooled considerably in recent trading. Groupon, which went public earlier this month, has slid a total of 35 per cent in just three days, and is now sitting below its IPO price; LinkedIn is still above its IPO price, but has fallen 40 per cent from its high; Pandora is down 46 per cent from its high and SINA is down 56 per cent from its high.
Since its debut, the Global X Social Media ETF has fallen about 14 per cent in the seven sessions that it has traded since its debut, reflecting withering hype rather than the social media excitement that it was evidently hoping to track.
At least the fund has delivered on one goal: It has given investors the opportunity of spreading risk among a number of different companies, rather than taking a flying leap on one name. Still, you have to wonder if investors are noticing the benefits of this diversification right now.