Meta, formerly known as Facebook, announced earnings that came in below expectations, causing the stock to plunge more than 20% in after-hours trading.
Given Facebook’s prominence in various ETFs, with seven funds holding allocations greater than 10%, this earnings miss will be felt within the performance of a range of ETFs.
Looking up the company using the ETF Stock Finder shows that Meta’s stock is currently held within 320 different ETFs. This means that more than 10% of all ETFs hold the company within their portfolios.
The fund with the largest allocation is the Communication Services Select Sector SPDR Fund (XLC), with nearly a quarter of the portfolio invested in Meta’s stock.
This means the ETF will notch a 5% loss in value when the market opens on Thursday solely due to Meta’s after-hours performance unless the price bounces back. Barring a rebound, the drop in Meta’s price takes XLC further into the red for the year.
As to be expected, other communications ETFs also hold large allocations to the company. Meta is the largest holding in both the Vanguard Communication Services ETF (VOX) and the Fidelity MSCI Communication Services Index ETF (FCOM), where it accounts for just over 17% of each portfolio.
It is also the largest holding in the iShares Global Comm Services ETF (IXP), where it has a 15.6% weighting.
Thematic ETFs Hit
Meta is also a top holding in several thematic ETFs. The Global X Social Media ETF (SOCL) and the Simplify Volt Pop Culture Disruption ETF (VPOP) hold 12.4% and 10.6% allocations, respectively, to the stock, meaning they stand to lose more than 2% from Meta’s price drop.
Meta’s prominence in many ETFs illustrates the risk of owning ETFs that have large allocations to a single stock. While the company may indeed be the face of the communications sector, which might justify these outsized allocations for some, it also means these funds’ performance is highly anchored to that of Meta, for better or for worse.
As most investors are likely buying ETFs to get diversified exposure to a certain sector or theme, these large allocations are something to be aware of as they present a risk to the end investor.
Interestingly, Meta announced on its earnings call that it would begin trading under the ticker symbol “META” sometime in the first half of 2022.
Roundhill Investments had recently given up the ticker after initially using it for the Roundhill Ball Metaverse ETF (METV), which launched in June 2021, just months before Meta announced its rebranding.
Contact Jessica Ferringer at [email protected] or follow her on Twitter
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