3 ETFs That Will Buy Twitter
The investing world was, well, atwitter with the Twitter (NYSE: TWTR) IPO that debuted last week. The stock gapped open higher before closing below the opening price on Thursday, and falling another seven percent on Friday.
The action in Twitter is not surprising, considering what happened to Facebook (NASDAQ: FB) last year when it went public. For months after the stock began trading, it drifted lower and eventually fell below the IPO price. It remains to be seen what will become of TWTR in the next few months, but so far the early hype has begun to wane.
Investors that do not want to take the risk of investing in a single company such as Twitter will have another option for owning the social media stock this week. At least a couple of ETFs are set to add TWTR to their portfolio in the next five days, creating a new avenue for investors to own a piece of the company:
Global X Social Media ETF(NASDAQ: SOCL). This ETF already has big positions in social media peers FB and LinkedIn (NYSE: LNKD) and the next to join the list will be TWTR. The ETF will wait five days from the day Twitter went public, putting the ETF in position later this week to add the newly traded company. The exact timing and size of the position will be revealed after the stock is purchased.
FB and LNKD each make up 9.5 percent of the portfolio, trailing only Asian peer Tencent Holdings (OTC: TCTZF). It would not be a surprise to see TWTR land in the top 10 holdings by the end of the week.
Renaissance IPO ETF (NYSE: IPO). This newly launched ETF will also wait five trading days to add TWTR, opening up the potential to add the stock later this week. It focuses on the 50 largest and most liquid U.S. IPOs. The current top holding is FB, with a 10 percent allocation, followed by drug maker Zoetis (NYSE: ZTS). The stocks can remain in IPO for up to two years after going public, likely creating Twitter as a top holding until November 2015.
First Trust IPOX 100 Index ETF (NYSE: FPX). The original IPO ETF could add TWTR after it''s been trading for seven days. But, if history is an indication as to when FPX will add TWTR, it may not be for a couple months. The ETF held off on adding FB after the first week of trading, and it opted to add the stock a few months after it went public. The move looks like genius now because FB eventually fell below its IPO price before rallying to new highs in the last month.
All three ETFs will offer investors exposure to Twitter, but the more important factor in deciding which one to buy comes down to the rest of the holdings. SOCL will concentrate solely on social media with international exposure. IPO will be one of the first ETFs to buy TWTR -- but could it be too early? And FPX will likely wait to add TWTR, which could be the best move based on history. Unfortunately choosing the best of the group cannot be debated in 140 characters or less.
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