News Column

Facebook Shares Moving Up

December 6, 2012

By Matt Krantz

As a new member of the Nasdaq 100 index, Facebook may get a boost on Wall Street. The closely watched index represents the 100 most valuable non-financial stocks trading on Nasdaq. Facebook shares will be added Dec. 12.

Analysts say being in the Nasdaq 100 is a potential boon for shares of the No. 1 social-networking giant.

The Nasdaq 100 is a Who's Who of big technology companies, such as Apple, Google and Microsoft.

Big chunks of Nasdaq 100 company shares are often bought and held long-term by exchange traded funds and major mutual funds that invest mostly or only in key stock indexes.

Inclusion in the index could even be considered a victory for Facebook, which has struggled to appeal to investors since its May 18 initial public offering that was mired in technical problems.

"The company is a lot more seasoned now," says Francis Gaskins of IPO Desktop Premium, a website devoted to IPOs. Being in the Nasdaq 100 "takes away some of the stain of the botched IPO."

Facebook's addition to the the Nasdaq 100 underscores the company's stock price rebound. Shares made their debut at $38 apiece, but quickly fell as investors discovered more about the IPO's problems and began to worry about the company's strategy to make money off its massive base of users.

The shares peaked at $43, then plummeted to just under $17.75 a share in September.

Facebook stock finished up 25 cents at $27.71 Wednesday, 44% higher than its recent Nov. 9 low of $19.21.

The stock has rallied in recent weeks despite concerns about a series of post-IPO lockup expirations that released hundreds of millions of shares for sale on the open market. Many feared the huge supply would drag Facebook's shares even lower.

Now, investors who build portfolios based on the Nasdaq 100 are likely to take a closer look at the stock, says Joseph Bonner of Argus Research in an e-mail to USA TODAY.

"Inclusion in the Nasdaq 100 should be a positive for (Facebook), since a bunch of index funds and ETFs now have to buy to maintain a match with the benchmark," Bonner says.

Investors had largely anticipated Facebook's addition to the index this year, explaining why there wasn't more reaction to the announcement, says Josef Schuster of IPO tracker IPOX Schuster.

Investors are likely far more interested in when Facebook might be added to the broader Standard & Poor's 500 index, which isn't likely anytime soon, Schuster says. "The S&P is much more important."

Source: Copyright USA TODAY 2012

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