The IPOX® Week, April 09, 2018

IPOX China (CNI) tops IPOX U.S. (IPXO) as China-based health care stocks surge. On the back of big swings in equities caused by uncertainty about U.S. trade policy and somewhat disappointing U.S. economic numbers ahead of the start of earnings season, the IPOX Indexes focused on Markets outside the U.S. outperformed the IPOX U.S. Indexes during the first week of the new quarter. Significant gains in specialty exposure linked to China domiciled health care benefited the diversified IPOX China (CNI), with the portfolio adding +0.42% to +10.34% YTD, while the IPOX Europe (IXTE) added +0.79% to +0.79 YTD. In the U.S., the IPOX 100 U.S. (IPXO) lost -1.34% to -0.91% YTD, outperforming the S&P 500 Index (SPX), proxy for U.S. stocks, by +4 bps. on the week to +168 bps. YTD. Notable moves amongst individual securities belonged to aforementioned China-linked health care exposure including Luye Pharma (2186 HK: +16.51%), China Resources Pharma (3320 HK: +14.36%), Wuxi Biologics Cayman (2269 HK: +7.49%), 3SBio (1530 HK: +7.47%) or Shanghai Fosun Pharma (2196 HK: +7.05%) which more than compensated for the weakness in IPOX heavyweight China-based ecommerce behemoth Alibaba (BABA US: -8.73%). 70/100 portfolio holdings in the IPOX 100 U.S. (IPXO) fell, underlying the broad-based weakness in U.S. stocks with high beta technology exposure lagging ahead of earnings, while key IPOX U.S. holding high frequency trading firm Virtu Financial (VIRT US: +8.18%) extended its YTD gain to a massive +95.08%.

IPOX-linked ETF (FPX, FPXI) performance review. Linked to the IPOX® 100 U.S., the USD billion 1.04 First Trust U.S. Equity Opportunities ETF (FPX) declined to -0.73% YTD, while the First Trust International IPO ETF (FPXI) dropped to +3.84 YTD. FPX and FPXI offer investors a turnkey solution to the “going public” effect of the largest U.S. (FPX) and International (FPXI) New Listings, often a pure proxy for economic growth and innovation.

IPOX® 100 U.S. Index Investing with the FPX ETF since 2006:

IPOX Price Returns (%) Last Week 2017 2018 YTD
Exposure: Global/International (xUS) (USD)
IPOX Global (IPGL50) -1.14 28.59 2.03
IPOX International (IPXI)* -1.19 37.80 3.14
Exposure: United States (USD)
IPOX Composite U.S. (IPXC)* -2.74 33.64 -0.23
IPOX 100 U.S. (IPXO)* -1.34 26.04 -0.91
IPOX 30 U.S. (IPXT) -1.17 26.63 -1.78
Exposure: Europe/Nordic Region (EUR)
IPOX Europe (IXTE) 0.79 19.27 0.79
IPOX Nordic (IPND) 1.06 17.91 -4.01
Exposure: Asia-Pacific/China Region (USD)
IPOX Asia-Pacific (IPTA) -0.20 23.30 1.44
IPOX China (CNI) 0.42 37.67 10.34

* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT and CME listed e-mini IPOX® 100 U.S. Index Futures [Symbol: IPOM8].

IPO Deal-flow Review & Outlook: Spotify (SPOT US) launched direct listing. Little deal flow seen. At least 4 notable (non-China A shares and non-local India) firms debuted last week, with the average (median) equally-weighted firm increased by 23.34% (3.59%) based on the difference between the final offering price and Friday’s close. Sweden-based music streaming giant Spotify (SPOT US: +12.06%) launched its “non-IPO” Direct Listing and soared from its reference price set by NYSE. The successful debut may pave the way for other tech companies to go public through this unconventional approach. In the European market, UK’s largest provider of outsourced regulatory services in the financial service industry, SimplyBiz (SBIZ LN: -5.59%) and Germany’s downsized real estate company Godewind Immobilien (GWD GR: -4.88%) fell after debut. Japanese Duty-Free shops operator JTC (950170 KS: +91.76%) surged based on final offer and became the best performing IPO of the week. Focus this week includes micro-cap biopharmaceutical company Alzheon (ALZH US) which has its lead product candidate dedicated to Alzheimer’s disease and other neurological disorders; and another “tech unicorn” Zuora (ZUO US). With an over $1 billion valuation, the San Mateo, CA-based company provides cloud-based software for subscription businesses.

Select IPOs traded (week: 04/02/2018) Country
Godewind Immobilien AG Germany
JTC Inc/Fukuoka Japan
The SimplyBiz Group Ltd Britain
Spotify Technology S.A. Sweden
Select IPOs expected (week: 04/09/2018) Country
Alzheon Inc U.S.A.
China Track Ltd Australia
Tridomain Performance Materials PT Indonesia
Zuora Inc U.S.A.

Josef Schuster is the founder of IPOX Schuster LLC (www.ipoxschuster.com), a Chicago-based Financial Services company specialized in Financial Products Design related to Initial Public Offerings and corporate Spin-offs. He is the chief architect of the IPOX Indexes, a global index group initiated in 2004 that encompasses an index technology allowing for asset-allocation focused exposure to the “going public” effect associated with global IPOs and Spin-offs. Mr. Schuster earned his Bachelor of Arts degree in Business Administration in 1994 from the European Business School, London. Mr. Schuster was also awarded a MSc in Accounting and Finance in August 1996 and a MPhil / PhD in Accounting and Finance in June 2003 from the London School of Economics.

ABOUT THE IPOX INDEXES: Through the range of the IPOX Indexes, market participants have an innovative opportunity to navigate the global IPO and Spin-off market and to track the performance of this economically significant sector more accurately and comprehensively than with any other index group. The IPOX Indexes accomplish the systematic indexation of the aftermarket performance of the IPO and Spin-off sector, while – at the same time – preserving the benefits of diversification. Linked to the IPOX 100 U.S. Index, for example, IPOX-linked investment products available to investors include the pioneering USD million 600, 5-star First Trust U.S. IPO ETF (ticker: FPX). On February 18, 2016, CME Group, the world’s largest exchange operator, launched e-mini IPOX 100 U.S. Index Futures, offering market participants for the first time a tool to manage the aggregate risk associated with U.S. IPOs and Spin-offs.

Disclosure: the author has no position in the stocks mentioned.

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