Earlier this month, Snap Inc (NYSE:SNAP), the purveyor of the popular social media application Snapchat, went public in one of the most widely anticipated initial public offerings in some time. To this point, Snap’s life as a public company has been rocky, as highlighted by a nearly 14% post-IPO tumble.
With all the enthusiasm surrounding Snap prior to the IPO, it is not surprising that the some of that anticipation trickled down to the world of exchange-traded funds.
However, there are some complexities when it comes to Snap and ETFs, not the least of which is the prospect of Snap being excluded from indices issued by Standard & Poor’s and MSCI Inc (NYSE:MSCI), which just happen to be the two largest index providers to ETF sponsors. Due to Snap’s arcane voting structure, the publicly available shares carry no voting rights, leaving all the power with the company’s insiders, a message that can be translated to “Snap wants the luxuries of being a public company without giving its investors any say.”
Still, the already beleaguered Snap IPO has some ETF prospects, including the following:
First Trust US Equity Opportunities ETF (FPX)
Once upon a time, the First Trust US Equity Opportunities ETF (NYSEARCA:FPX) indicated in its name that it is an IPO ETF. The ETF’s name has changed, but its ability to hold newly public companies has not.
In fact, FPX was the first ETF to add Snap.
The good news, at least for now: Snap represents just 0.26% of FPX’s weight, making it one of the smallest of the ETF’s 102 holdings.
FPX can hold newly public companies for up to 1,000 days past their IPOs, so investors will see some companies that are well past their IPO dates in this ETF. And Snapchat likely will become a larger part of the portfolio over time.
Renaissance IPO ETF (IPO)
The Renaissance IPO ETF (NYSEARCA:IPO) has the flexibility to add appropriately-sized new issues to its lineup on a fast entry basis, usually within five days of the stock’s first trading day. Shrewdly, the ETF’s issuer chose not to do that with Snap, opting rather to include the stock in IPO’s roster when the fund is rebalanced later this month.
For investors, that is relevant, because IPO is likely to sport a significantly larger Snap weight than the rival FPX; however, the Renaissance ETF is likely to get better pricing given Snap’s post-offering slide.
IPO can hold stocks for up to two years after their debut.
Global X Social Media ETF (SOCL)
The Global X Social Media ETF (NASDAQ:SOCL) makes for a predictable home for Snap. And that is the case currently — Snap is SOCL’s 10th-largest holding at a weight of just over 4%.
Global X’s fund provides a case study in why ETFs are sometimes a better avenue to hot stocks that initially prove disappointing. Obviously, Snap, to this point, has been a dud as a public company, but SOCL has traded modestly higher following the offering.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.