Some investors are hoping that Facebook (NASDAQ:FB) will get some juice when the stock gets added to key indexes. But according to a recent piece in The Wall Street Journal, this may be a false hope.
One issue is timing. While Facebook will be eligible for the Nasdaq 100 index in September, the inclusion may actually not happen until December.
But of course, the most important index is the S&P 500, which is tied to many mutual funds and exchange-traded funds (ETFs). The problem? Well, it could take a couple years for Facebook’s stock to be included in that benchmark. Keep in mind that this was the case even for Google (NASDAQ:GOOG).
Even if the timeline is much quicker, the impact of the Nasdaq-100 and S&P may be only a few percentage points to the stock price. And that would probably be just a temporary boost.
In other words, Facebook’s fate is mostly a matter of the fundamentals — that is, if the company can get its growth momentum back. Unfortunately, it looks like that could take at least a couple quarters as Facebook focuses more on its mobile advertising efforts.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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