The IPOX® Week, August 14, 2016

  • IPOX records massive relative gains on strong earnings, momentum, China exposure.
  • IPOX-linked Funds in focus: FPX, FPXI, OIPAX.
  • Ahead of a busy September, quiet on the IPO front.

IPOX records massive relative gains on strong earnings, momentum, China exposure. On the back of strong earnings, continued momentum and a huge week for China-linked IPOs traded in the U.S., all IPOX Indexes recorded massive absolute and relative strength ahead of U.S. Futures and Options expiration last week. On the global level, e.g., the IPOX Global 30 (IPGL30), which provides exposure to the largest, easily tradable and super-liquid global IPOs and Spin-offs, surged +3.01% to +4.15% YTD, while the IPOX International (IPXI), underlying for the First Trust International IPO ETF (FPXI), jumped by +3.95% to +0.65% YTD. Big gains extended to the IPOX Regional Indexes, with the dynamic 780-member-strong USD trillion 2.2 IPOX U.S. Composite (IPXC) rising +2.38% to +8.48% YTD benefiting from its exposure to recent U.S. IPOs such as communiations equipment maker 05/2016 IPO Acacia Communications (ACIA US: +43.95%) and Chinese IPOs listed in the U.S., including social media platform operator Weibo (WB US: +19.10%), Chinese e-commerce behemoths IPOX heavyweights Alibaba (BABA US: +16.15%) and JD.com (JD US: +12.81%) or online lender Yirendai (YRD US: +15.02%). The IPOX Strategies applied to some of the regional markets outside the U.S. continued trade well and extended recent gains, with the IPOX Europe (IXTE, IPND), IPOX Developed Asia-Pacific (IPTA) and IPOX China (CNI) recording solid gains. Companies in focus there included German online shoe retailer Zalando (ZAL GY: +10.58%), German car parts maker Schaeffler (SHA GY: +10.22%), French cable and satellite services providers hard-hit Altice (ATC NA: +10.31%) and SFR Group (SFR FP: +8.03%). Takeover speculation continued to drive a fourth week of gains in mainland China property developer IPOX heavyweight China Vanke (2202 HK: +5.61%). We note big selling in select small-cap and mid-caps including FL-based Norwegian Cruise Lines (NCLH US: -10.81%), outdoor advertising firm Vista Outdoor (VSTO US: -18.65%), MA-based biotech 02/16 IPO Editas Medicine (EDIT US: -19.14%) or online household goods seller Wayfair (W US: -18.82%) after diappointing quarterly results.

IPOX Returns (%) (P) Week 2015 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) 2.26 0.99 0.06
IPOX Global 30 (IPGL30) 3.09 -0.96 4.24
IPOX Intern. (IPXI)* 4.16 -5.85 0.86
Exposure: United States (USD)
IPOX US Comp. (IPXC) 2.38 -3.90 8.48
IPOX 100 U.S. (IPXO)* 0.32 1.57 5.87
IPOX 30 U.S. (IPXT) 0.23 4.91 6.76
Exposure: Europe (EUR)
IPOX Europe (IXTE) 2.47 14.41 -5.50
IPOX Nordic (IPND) 1.50 23.88 1.91
Exposure: Asia-Pacific (Developed) (USD)
IPOX Asia-Pacific (IPTA) 2.94 -2.32 5.53
Exposure: China (USD) (x A-Shares)
IPOX China C. (IPXUCHCHP) 7.10 -14.45 1.07
IPOX China (CNI) 2.27 -9.10 -10.53

*Basis for Exchange-Traded Products (ETPs)

IPOX-linked funds in focus: FPX, FPXI, OIPAX. Linked to the IPOX 100 U.S. Index (IPXO) and the IPOX International Index (IPXI), both the First Trust U.S. IPO ETF (FPX) and the First Trust International IPO ETF (FPXI) recorded outsized gains last week: The 5-star USD million 590 FPX added +0.36% to +6.31% YTD, while FPXI added +3.15% to +1.31% YTD. The IPOX-linked Catalyst IPOX Allocation Fund (OIPAX US), an actively managed mutual fund available to investors in the U.S., benefited from its exposure to some of the surging IPOs just recently listed in the U.S., jumped +3.39% to +11.55% YTD.

IPOs (week of Aug. 8): Ticker Return (%)
Medpace Holdings Inc MEDP US 21.91
Protagonist Therapeutics Inc PTGX US -3.58
Royal Catering Group 8300 HK 60.00
Airgain Inc. AIRG US 0.00

Ahead of a busy September, quiet on the IPO front. Just 4 accessible firms (excluding Chinese A-Shares and domestic India) commenced trading last week with the average (median) firm gaining +19.58% (10.96%) based on the difference between the final offering price and the week’s close. The week’s largest deal, Cincinnati-based USD billion 1.1 Medpace Holdings (MEDP US), a provider of drug and medical device development services, debuted successfully, underlying big momentum behind U.S. IPOs on the back of huge post-IPO gains in 06/16 IPO application software market Twilio (TWLO US: +85.10% since first close) or 05/16 IPO communication equipment maker Acacia Communications (ACIA US: +209.11% since first close).

IPOs (week of Aug. 14): Ticker Sector
AzurRX Biopharma Inc. AZRX US Health Care

No signficant deal flow is lined up for the upcoming week in the accessible markets. Amid the weak performance of equity markets in Mainland China in generally, IPO deal flow is set to run at a brisk pace during the week with a number of firms expected to price and trade, including TV network Guangxi Radio and Television (600936 CH).

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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