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The IPOX® Week, August 21, 2017

  • IPOX U.S. dodges weakness in U.S. small- and mid-caps anew, IPOX International closes at weekly record.
  • IPOX-linked ETFs gain on the week, AUM rise.
  • Global Deal-flow Review and Outlook: Vodacom Tanzania rises, quiet on the IPO front.

IPOX U.S. dodges weakness in U.S. small- and mid-caps anew, IPOX International closes at weekly record. Most IPOX Indexes rose last week, as the impact of good earnings and (perceived) corporate action news in key holdings outweighed continued negative momentum in U.S. small- and mid-caps amid political uncertainty. On the global level, e.g., the IPOX Global 50 (IPGL50) – benchmark for the performance of the largest New Listings in the global regions using the IPOX® Indexes Technology – added +0.99% to +18.90% YTD, significantly outpacing the falling global market. Within the IPOX Regional Indexes Universe, all exposure traded well across with only the IPOX 100 U.S. (IPXO) falling fractionally on the week, succumbing to Friday’s late day weakness in U.S. stocks as options expired. We note the continued gains in the IPOX Europe (IXTE), also benefiting the IPOX International (IPXI), which finished the week at a fresh weekly all-time high, adding +0.88% to +30.14% YTD.

Individual companies in focus, Warren Buffet buys big stake in key IPOX 100 U.S. (IPXO) portfolio holding: Amid the jittery environment for equities in general, broad diversification within the respective IPOX Portfolios positively affected performance. In China-linked exposure, e.g., the negative impact of mediocre earnings reported by logistics firm JD.com (JD US: -12.57%) was more than offset by big gains in e-commerce platform IPOX heavyweight Alibaba (BABA US: +10.42%) and social networker Weibo (WB US: +8.41%) after results. Further, in the IPOX U.S. (IPXC, IPXO, IPXT), social networker beleaguered Snap (SNAP US: +18.43%) – the previous week’s worst performing stock – ranked as the best performing portfolio holding last week. Other notable stocks affected by post-earnings momentum included biotech Kite Pharma (KITE US: +8.45), luxury pet food maker Blue Buffalo (BUFF US: +4.05%), Arista Networks (ANET US: +3.81%), home products store operator Floor & Decor (FND US: -7.89%), educational services provider Laureate Education (LAUR US: -7.15%) and HealthEquity (HQY US: -6.34%), a provider of technology services to the health industry. We note continued strong (perceived) corporate action activity in the IPOX Indexes, with U.S. car maker IPOX heavyweight Fiat Chrysler (FCAU US: +8.27%) rumored to entertain offers from China-linked investors, while Warren Buffet’s Berkshire Hathaway (BRK/B US: +1.27%) disclosed a stake in IPOX holding General Electric (GE US: -2.60%) Spin-off consumer financial Synchrony Financial (SYF US: +2.98%), cementing his strategy of taking significant stakes in select Spin-offs trading in the IPOX Holding Period Window, a time period defined as extending to approximately four years after the consummation of the respective corporate action.

IPOX Price Returns (%) Last Week Q2 2017 YTD 2017
Exposure: Global/International (xUS) (USD)
IPOX Global (IPGL50) 0.99 5.54 18.90
IPOX Global (IPGL30) 0.72 8.07 19.54
IPOX International (IPXI)* 0.88 9.24 30.14
Exposure: United States (USD)
IPOX Composite U.S. (IPXC)* 1.02 7.44 19.83
IPOX 100 U.S. (IPXO)* -0.05 3.86 9.70
IPOX 30 U.S. (IPXT) 0.46 4.62 11.16
Exposure: Europe/Nordic Region (EUR)
IPOX Europe (IXTE) 1.16 4.95 18.86
IPOX Nordic (IPND) 0.35 8.64 14.94
Exposure: Asia-Pacific/China Region (USD)
IPOX Asia-Pacific (IPTA) 1.01 2.99 15.36
IPOX China C. (IPXUCHCHP)* 3.50 10.06 32.76
IPOX China (CNI) 0.31 4.62 23.31

* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [commodity trading symbol: IPOU7]).

IPOX-linked ETFs gain on week, AUM rise: Last week, the IPOX 100 U.S. (IPXO)-linked USD million 833 First Trust US. Equity Opportunities ETF (FPX) rose to +10.32% YTD, while the younger USD million 20 IPOX International (IPXI)-linked First Trust International IPO ETF (FPXI) extended the YTD gain to +32.15%, a new all-time high. The “FPX” ETF and “FPXI” ETF provide a granular global solution to investing in the “going public” effect associated with the largest New Listings (IPOs and Spin-offs) domiciled in the U.S. and trading on a U.S. market (“FPX”) and domiciled outside the U.S. trading on an accessible global exchange (“FPXI”).

Global Deal-flow Review and Outlook: Vodacom Tanzania rises, quiet on the IPO front. 4 notable accessible global (non-China A shares) firms debuted last week, with the average (median) equally-weighted stock gaining by +0.65% (+5.94%) based on the difference between the final offering price and the Friday’s close. Focus was on IPOs in Africa & The Middle East, including telecom carrier Vodacom Tanzania (VODA TZ: +5.88%) which rose based on final offer. No notable IPOs are scheduled to debut during the week.

Traded IPOs (week of August 14, 2017) Country
Al Ahlia Insurance Co SAOC Oman
Investment Holding Group Qatar
Vodacom Tanzania Ltd Tanzania
Wilmcote Holdings Plc Britain
Upcoming IPOs (week of August 21, 2017) Country
No notable IPOs scheduled

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.

This article is provided for educational purposes only and is not considered to be a recommendation or endorsement of any trading strategy. The author is not affiliated with Lightspeed Trading and the content and perspective is solely attributed to the author.

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