Russell 3000 Index to Include Facebook As Growth Declines


Russell 3000 Index to Include Facebook As Growth Declines

In a new story line for the beaten up Facebook Inc (NASDAQ:FB), the stock has been included on a preliminary list to join the Russell 3000 Index.

According to Russell Investments’ website, this index “measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.”

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The company annually rebalances its index and on Monday it said that Facebook will be added to the index after finalizing its reconstitution on June 22 after the market’s close, according to Forbes.

In response to the reconstitution, Steve Wood, chief market strategist for North America at Russell Investments said, “Russell’s index reconstitution reflects the market decline over the past year. That said, returns have been far from uniform.”

“Even as the flare-up in the euro zone crisis, China’s slowdown and relatively soft U.S. economic data have weighed on investor sentiment in recent weeks, the global markets showed resilience when viewed over the course of a year. Furthermore, Russell Indexes reflected diverse returns and decreased correlations across global markets in the last year, reinforcing the importance of a well-diversified global multi-asset portfolio approach.”

The social networking site’s addition will be the largest one to the index in terms of market capitalization ($59.9 billion) but Apple (NASDAQ:AAPL), with its $540.2 billion market capitalization, will replace Exxon Mobil Corporation (NYSE:XOM) as the biggest Russell 3000 company said Russell Investments.

Splunk Inc (NASDAQ:SPLK) and financial services provider EverBank Financial Corp (NYSE:EVER) also made the short list.

While this comes as good news for Facebook, another story on Monday may have overshadowed it.

Facebook’s Growth Declines

The Wall Street Journal reported that in April, Facebook’s growth rate appears to be slowing as its unique U.S. visitors only totaled 158 million–just a five percent rise from the previous year according to comScore. This is the slowest growth rate since comScore began tracking the data in 2008.

In addition, the rate is lower from April 2011’s 24 percent growth and April 2010’s 89 percent growth.

Another declining note for the company was the 16 percent growth in the amount of time spent by people on the site from the previous year. This compares to a 23 percent increase in 2011’s same month and 2010’s 57 percent rise.

In the U.S. Facebook has the attention of 71 percent of the 221 million Internet users, reported comScore.

The slowing numbers don’t necessarily have to paint a grim picture for the company. According to comScore analyst Andrew Lipsman, with Facebook’s leading presence and and the amount of time spent on it, “declining growth rates are a natural part of the growth cycle.”

This is interesting as the company pitched itself to Wall Street on the basis of its U.S. growth. Upon going public in May, the company had a $100 billion-plus valuation thanks to investors looking for Facebook to grow at triple and double-digit numbers.

But now some would say that Facebook’s IPO was misleading.

Expectations for the IPO were similar to ones for Google Inc.’s 2004 entry but it does not have the same happy ending. Since being priced at $38 for the IPO, Facebook’s shares are down 29 percent; it is currently trading at $27.50 and its market cap has sunk to $59.9 billion.

Investors have also been hit hard by the IPO after jumping on the bandwagon in hopes of growth. Trading glitches on the first day of trading continue to mount and on Monday, UBS came out as the biggest loser in the amount of money lost in Facebook’s IPO at an estimated $350 million.

What’s the next shoe to drop?


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