Social Media ETFs Off to Slow Start

Swan Lake, MS 11/17/2011 (StreetBeat) – This week, Global X, a boutique fund provider, unveiled the first ever ETF designed to provide investors with dedicated exposure to the burgeoning social media industry. While the firm may be hoping for Facebook-like success with this new launch, it is likely going to take some time before the fund becomes anything to tweet home about.

In the same way that many ETF sponsors looking for new ways to target the bond market have opted to launch foreign debt-backed products, niche corners of the technology sector have become a popular theme among those looking to construct equity-tracking ETFs.

First Trust has been leading the push. The brand new Global X Social Media ETF (SOCL) follows the introductions of products such as First Trust NASDAQ CEA Smartphone Index Fund (FONE) and the First Trust ISE Cloud Computing Index Fund (SKYY).

So far, the performance of these ETF newcomers has been mixed. While SKYY has managed to gather some respectable interest, the same cannot be said for the smartphone ETF. Despite being available since mid-February, the fund's average daily trading volume has remained weak, failing to surpass the 2000 level. During late Wednesday trading, SOCL's volume stood at over 21,000. However, it will likely take longer to determine where this fund eventually falls on this range.

As I've explained in the past, I see potential in the social media realm. Ultimately, however, I would encourage conservative investors to avoid the lure of SOCL at this time.

Aside from the uncertainty surrounding the fund's ability to gather and sustain interest, in looking at SOCL's breakdown, it is likely that those that have not been closely following the proliferation of social media around the globe may be left scratching their heads here.

Domestic investors may be familiar and well-versed with the services provided by household names like Facebook, Twitter, LinkedIn (LNKD), Google +, and Groupon (GRPN).

Unfortunately, the largest percentage of the fund's index is comprised of firms outside the U.S. Investors will have to understand how individuals from around the globe utilize social media in order to fully understand SOCL.

China, in particular, will be of utmost importance. According to the fund's fact sheet, names including Tencent Holdings, Sina (SINA) and Netease (NTES) are three of the fund's top 10 positions, each accounting for a 10% slice of its assets. In total, Chinese firms account for close to 40% of its index.

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LinkedIn Corp. (NYSE: LKND) Among Decliners As Tech Stocks Retreat

Tallahassee, FL 11/4/11 (StreetBeat) --Shares of LinkedIn Corp. (NYSE: LKND) took a hit in premarket trading Friday after the professional networking service reported its first quarterly loss since going public in May.

The company lost $1.6 million, or 2 cents per share, in the third quarter as it invested more money to expand. It was the first time that LinkedIn has recorded a loss since the final three months of 2009, according to documents filed in preparation for its initial public offering.

Excluding items unrelated to its ongoing business, LinkedIn earned 6 cents per share, better than the break-even that analysts polled by FactSet were expecting. The company's revenue more than doubled to $139 million, also beating Wall Street's expectations.

Still, investors seemed to back off of LinkedIn's stock to see if the company's investments are paying off. Its shares fell $9, or 10.3 percent, to $78.50 in premarket trading Friday. LinkedIn's shares priced at $45 in its IPO, and have since traded between $60.14 and $122.70, the high point achieved on the stock's first day of trading.

Separately, the company also filed for a proposed public offering of $100 million of its shares. It plans to use the proceeds for working capital, including the expansion of its product development, acquisitions and capital expenses.

Jefferies analyst Youssef Squali called LinkedIn's report "fantastic," adding that the results should come as no surprise given the company's "relatively conservative" guidance heading into the quarter and its strong post-IPO momentum. He raised his target price to $92 from $81 but kept his rating at "Hold."

LinkedIn's earnings came the same night that Groupon Inc., the much-ballyhooed daily deals company, priced its initial public offering at $20 per share. The price gives Groupon Inc. a market value of $12.7 billion, making it the IPO the second largest by an Internet company behind Google in 2004.

Google Inc. made its public debut at a market cap of $23. In comparison, LinkedIn went public in May with a market value of $4.3 billion and was worth $8.4 billion at the end of trading Thursday.

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