How long is the delay from IPO to TSM (Facebook)?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
financial.freedom
Posts: 367
Joined: Fri Oct 03, 2014 1:18 am

How long is the delay from IPO to TSM (Facebook)?

Post by financial.freedom » Thu Jun 02, 2016 10:00 am

When Facebook went public I thought about investing some "play money" in it (<5% of portfolio), but after reading threads on the forum decided it was not worth the risk. It is such a large company that it surprised me it was not a part of VG Total Stock Market fund at that time. Later down the road, it showed up as one of the top ten holdings of TSM.

When did Facebook become one of the funds in TSM?

In general, how long is the delay from IPO to TSM?

mervinj7
Posts: 731
Joined: Thu Mar 27, 2014 3:10 pm

Re: How long is the delay from IPO to TSM (Facebook)?

Post by mervinj7 » Thu Jun 02, 2016 10:35 am

Not sure about the TSM index, but facebook was added to the S&P 500 in Dec 2013, 19 months after IPO. Google was also added 19 months after IPO while Metlife was added just 8 months after its own IPO.

http://money.cnn.com/2013/12/11/investi ... ok-sp-500/

User avatar
Phineas J. Whoopee
Posts: 7723
Joined: Sun Dec 18, 2011 6:18 pm

Re: How long is the delay from IPO to TSM (Facebook)?

Post by Phineas J. Whoopee » Thu Jun 02, 2016 1:58 pm

For Total Stock (among others), Vanguard uses a CRSP (Center for Research in Security Prices) index.
The CRSP Methodology Guide, on p. 16, wrote: Adds and Delists
Initial Public Offerings (IPOs)


A new security resulting from an initial public offering (IPO) is considered for inclusion after trading regular-way for five days on a CRSP exchange of interest. Total company market capitalization is calculated using the closing price and shares known on the first day of trading.

If the offered security’s total company market capitalization is at least as large as the breakpoint of the CRSP U.S. Large Cap Index, then it is eligible to be added to the appropriate indexes after the close of the fifth day of trading as a Fast Track IPO. The security must also pass the eligibility and investability screens (however, for Fast Track IPOs, the minimum Float Share Requirement is 10 percent), as stated in the “Creating the Index-Eligible U.S. Equity Market Universe” section of Chapter 2. Otherwise, the security is not not immediately added to
indexes but is reviewed for inclusion at the next regularly scheduled quarterly ranking.
"Eligible to be added" does not mean the same thing as immediately added. CRSP also uses a randomizing method to avoid being front run.

I recommend reading the linked .pdf for further detail.

PJW

financial.freedom
Posts: 367
Joined: Fri Oct 03, 2014 1:18 am

Re: How long is the delay from IPO to TSM (Facebook)?

Post by financial.freedom » Thu Jun 02, 2016 4:57 pm

Thank you for the replies! 19 months seems a long time to be included, but I guess not over the course of an investing career for a buy-and-hold BH index investor.

mervinj7
Posts: 731
Joined: Thu Mar 27, 2014 3:10 pm

Re: How long is the delay from IPO to TSM (Facebook)?

Post by mervinj7 » Thu Jun 02, 2016 6:13 pm

financial.freedom wrote:Thank you for the replies! 19 months seems a long time to be included, but I guess not over the course of an investing career for a buy-and-hold BH index investor.
That's interesting. I read the same article and thought "wow!, it only took Facebook 19 months from IPO to become of the one "top" 500 companies in the U.S". For thousands of other companies, that timeframe to relative success is infinite.

Boglegrappler
Posts: 1105
Joined: Wed Aug 01, 2012 9:24 am

Re: How long is the delay from IPO to TSM (Facebook)?

Post by Boglegrappler » Thu Jun 02, 2016 6:32 pm

That's interesting. I read the same article and thought "wow!, it only took Facebook 19 months from IPO to become of the one "top" 500 companies in the U.S". For thousands of other companies, that timeframe to relative success is infinite.
Facebook waited a rather long time to go public, and was quite large at the time it did the IPO, although its growth rate had been stunning. It might have been one of the 500 largest at the time of the IPO, measured by market valuation. It was worth over 80 billion post offereing, and it had nearly $4 billion in revenue at the time of the offering.

The IPO prospectus
http://investor.fb.com/secfiling.cfm?fi ... IK=1326801

User avatar
JoMoney
Posts: 6329
Joined: Tue Jul 23, 2013 5:31 am

Re: How long is the delay from IPO to TSM (Facebook)?

Post by JoMoney » Fri Jun 03, 2016 3:46 am

FWIW, the S&P500 is not just the 500 largest companies, and has more stringent criteria and seasoning requirements before a company is eligible to be included in the index.

Facebook went IPO on May 18, 2012
I can't say when it was added to TSM exactly, but it was listed in the holdings of Vanguard's Total Stock Market fund as of the semi-annual report June 30, 2012
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

randomguy
Posts: 6682
Joined: Wed Sep 17, 2014 9:00 am

Re: How long is the delay from IPO to TSM (Facebook)?

Post by randomguy » Fri Jun 03, 2016 6:28 am

mervinj7 wrote:
financial.freedom wrote:Thank you for the replies! 19 months seems a long time to be included, but I guess not over the course of an investing career for a buy-and-hold BH index investor.
That's interesting. I read the same article and thought "wow!, it only took Facebook 19 months from IPO to become of the one "top" 500 companies in the U.S". For thousands of other companies, that timeframe to relative success is infinite.
It didn't take facebook 19 months to become one of the top 500 companies. It took ~10 years. It took the active stock pickers at the S&P 19 months to recognize that 10 years of work had resulted in one of the most valuable companies in the US.

Post Reply