The IPOX® Week, December 05, 2016

  • IPOX U.S. Indexes follow NASDAQ lower on mixed earnings, rising rates and a stronger dollar.
  • Other IPOX Regional Indexes lag markets.
  • U.S. IPO window opening as Financial Athene Holding (ATH US) set to trade. Meitu (1357 HK) set to price.

IPOX U.S. Indexes follow Nasdaq lower on mixed earnings, rising rates and a stronger dollar. The IPOX U.S. Indexes fell last week, with the diversified and broad-based IPOX 100 U.S. Index (IPXO) declining by -2.34% to +3.30% YTD, outperforming the Nasdaq 100 Index (NDX), while lagging the S&P 500 (SPX), the main gauge for U.S. stocks. Big declines in high-beta stocks susceptible to higher rates and a strong dollar as well as negative momentum in firms having recently announced disappointing corporate results outweigh the impact of the surge in oil helping energy firms, for example. Moreover, key IPOX heavyweights continued to trade lackluster. Individual exposure in focus included recently added communications equipment maker 05/2016 IPO Acacia Communications (ACIA US: -14.88%), infrastructure software maker Palo Alto Networks (PANW US: -10.49%) or health care services provider Quintiles IMS (Q US: -8.12%) which saw a number of downgrades after the announcement of executive leadership changes following the merger. Stocks with upside included independent oil and natural gas producers Diamondback Energy (FANG US: +8.75%) and Parsley Energy (PE US: +6.87%). Amid big global strength in the sector and strong earnings, we also note a weekly post-IPO high in container and packaging firm USD billion 5.9 Berry Plastics Group (BERY US: +5.14%), the supplier of Dunkin’ Brand’s (DNKN US: +0.52%) coffee cubs. In all, 77/99 stocks in the IPOX 100 U.S. (IPXO) fell on the week, with the average (median) equally-weighted holding shedding -2.35% (-2.15%), in line with the applied market-cap weighted index.

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -1.49 8.91 -3.27
IPOX Global 30 (IPGL30) -1.19 9.85 -0.11
IPOX Intern. (IPXI)* -0.28 11.01 -4.37
Exposure: United States
IPOX Composite U.S. (IPXC)* -2.62 11.33 6.00
IPOX 100 U.S. (IPXO)* -2.34 7.16 3.30
IPOX 30 U.S. (IPXT) -2.44 8.41 5.33
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -1.82 12.02 -6.78
IPOX Nordic (IPND) -1.80 7.45 -6.61
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) 0.94 5.28 0.33
IPOX China C. (IPXUCHCHP)* -1.22 16.94 -0.35
IPOX China (CNI) -1.11 11.59 -5.30

* Basis for Exchange-Traded Products (e.g. FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [IPOZ6]).

Other IPOX Regional Indexes lag markets. With the exception of the IPOX Asia-Pacific (IPTA), other IPOX Regional Indexes fell on the week. Ahead of a key Italian vote and amid rising rates, for example, big weakness in select German exposure weighed on the IPOX Europe (IXTE) with notable downside in auto parts makers Kion Group (KGX GY: -10.41%), Hella (HLE GY: -5.32%) or Schaeffler (SHA GY: -2.91%), while Italian specialty apparel store operator anorak maker Moncler (MONC IM: +1.59%) rose, benefitting from colder temperatures and the expectation of brisk U.S. holiday sales. Following another jump in rates, we note continued strength in last year’s big Japanese privatization offerings, including Japan Post Bank (7182 JP: +5.54%), Japan Post Insurance (7181 JP: +4.34%) and Japan Post Holdings (6178 JP: +4.24%).

U.S. IPO window opening as Financial Athene Holding (ATH US) set to trade. Meitu (1357 HK) set to price. Global IPO activity remained brisk, as at least 7 accessible firms started to trade on an accessible exchange. Against the backdrop of a weak IPOX Nordic Index (IPND), focus remained on the region, with the respective deals (ARCUS NO, DNA FH, VOLO SS) closing flat to higher based on final offer on the week. The window for IPOs in the U.S. is set to open with the max. USD billion 1.15 IPO of P/E-backed Bermuda-based Re-insurer Athene (ATH US). Amid big returns for investors in select China-linked tech-IPOs YTD, including Nasdaq-traded Weibo (WB US), we note the start of book building in app maker Meitu (1357 HK), the most significant tech IPO set to trade in Hong Kong in recent history.

Traded IPOs (wk.: 11/28) Identifier Return (%)
Arcus ASA ARCUS NO 2.33
CMON Ltd 8278 HK 1508.70
DNA Oy DNA FH -0.89
Food Wise Holdings Ltd 1632 HK 275.00
Goldway Education Group Ltd 8160 HK 78.05
Innovative Industrial Properties IIPR US -7.75
Volati AB VOLO SS 10.34
Traded IPOs (wk.: 11/21) Identifier Sector
Athene Holding Ltd ATH US Financials
ByggPartner I Dalarna Holding BYGGP SS Industrials
CSC Financial Co Ltd 6066 HK Financials
Gudou Holdings Ltd 8308 HK C. Discr.
Ichor Holdings Ltd ICHR US Industrials
Polar Power Inc POLA US Industrials
Progressive Path Group 1581 HK Industrials
Skeljungur HF SKEL IR Energy
Smart Eye AB N/A SS Info. Tech.

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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