The IPOX® Week, December 17, 2018

  • IPOX Indexes fall for 2nd week, most outperform benchmarks. Notable corporate actions in IPOX Europe.
  • IPOX Market Neutral Global gains on week, U.S. leg drives strong weekly rise.
  • IPO Deal-flow Review & Outlook: Streaming giant Tencent Music Entertainment (TME US), Club Med’s owner Fosun Tourism (1992 HK) finish week below offer. SoftBank’s telecom unit (9434 JP) set for the biggest IPO in Japan and the 2nd largest IPO in history.

IPOX Indexes fall for 2nd week, most outperform benchmarks. Notable corporate actions. Amid continued uncertainty over global trade, European and U.S. politics and big selling in U.S. small-caps (RTY: -2.57%), most IPOX Indexes recorded a 2nd week of losses, however, outperformed most benchmarks ahead of expiration. In the U.S., e.g., the IPOX 100 U.S. (IPXO) fell -0.74% to -5.52% YTD, 52 bps. less than the S&P 500 (SPX), benchmark for U.S. stocks. Strong relative performance extended to other IPOX baskets, including the IPOX International (IPXI), IPOX Asia-Pacific (IPTA) and IPOX China (CNI). Individual stocks with most upside included China-domiciled exposure such as H.K.-traded 8/8/2018 IPO infrastructure play China Tower (788 HK: 9,68%) and e-commerce platform operators U.S.-traded PDD (PDD US: 12.08%) and Uxin (UXIN US: 60.26%). In the U.S., strength in social networkers Twitter (TWTR US: 9.26%) or Match (MTCH US: 8.35) and biotech Alteryx (AYX US: 8.47%) was not enough to compensate for the big weakness, including in shopping platform operator StichFix (SFIX US: -22.80%) or specialty chemicals maker Versum (VSM US: -12.09%). We also note some significant corporate action driven activity in the IPOX 100 Europe (IPXO) universe, with (perceived) P/E-driven activity propelling stocks including German IT market place operator Scout24 (G24 GY: 11.84%) and Swedish industrial Ahlsell (AHSL SS: 24.30%).

IPOX® 100 U.S. Investing with the ‘FPX’ ETF since 2006

Select IPOX-linked investment products performance: The IPOX 100 U.S. (IPXO)-linked First Trust U.S. Equity Opportunities ETF (FPX), e.g., dropped by -0.83% to -5.24% YTD last week, while the IPOX International (IPXI)-linked “FPXI” ETF showed signs of recovery, closing the week -10.58% YTD lower. The actively managed Catalyst IPOX® Allocation Fund (OIPAX) fell to -1.97% YTD last week.

Select IPOX® Indexes Returns (%) Last Week 2017 2018 YTD
IPOX® Long-Only: Global/International
IPOX® Global (IPGL50) (USD) -0.23 28.59 -9.22
IPOX® International (IPXI)* (USD) -0.41 37.80 -11.83
IPOX® Long-Only: United States
IPOX® Composite U.S. (IPXC)* -0.80 33.64 -4.32
IPOX® 100 U.S. (IPXO)* -0.74 26.04 -5.68
IPOX® 30 U.S. (IPXT) -0.84 26.63 -7.02
IPOX® Long-Only: Europe/Nordic
IPOX® 30 Europe (IXTE) (EUR) -0.67 19.27 -11.78
IPOX® Nordic (IPND) (EUR) 0.92 17.91 -13.00
IPOX® 100 Europe (IPOE)* (USD) -1.16 41.77 -15.94
IPOX® Long-Only: Asia-Pacific/China
IPOX® Asia-Pacific (IPTA) (USD) -1.17 23.30 -2.46
IPOX® China (CNI) (USD) 1.84 37.67 -17.98
IPOX® Japan (IPJP) (JPY) -3.25 N/A N/A
IPOX® Market Neutral (Long-Short)
Beta Neutral Strategy: Yes Week
IPOX® Market Neutral Asia-Pacific** X  -0.76 9.70
IPOX® Market Neutral Europe** X  0.04 18.83
IPOX® Market Neutral U.S.** X  1.40 8.22
IPOX® Market Neutral Global** X  0.52 10.52

* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT and CME-traded e-mini IPOX® 100 U.S. Futures [Symbol: IPOZ8]. ** Live since 03/18.

IPO Deal-flow Review & Outlook: Streaming giant Tencent Music Entertainment (TME US), Club Med’s owner Fosun Tourism (1992 HK) finish week below offer. SoftBank’s telecom unit (9434 JP) set for the biggest IPO in Japan and the 2nd largest IPO in history. A total of 13 firms debuted last week across accessible global regions, with the average (median) equally-weighted company adding 0.17% (0.00%) based on the difference between the final offering price and Friday’s close. The general market weakness adversely affected the performances of some high-profile unicorns: In the U.S., e.g., Chinese tech conglomerate Tencent’s music business unit spin-off Tencent Music (TME US: -1.46%) closed the week below its two-month delayed and low-end priced offering, while in Hong Kong, the widely-known holiday resort provider Club Med’s Chinese owner Fosun International spinoff Fosun Tourism Group (1992 HK: -3.97%) flopped with little retail appetite. While both Japan and Hong Kong are about to see a large number of small players across a broad range of sectors in the IPO market amid year end, spotlight of the week is on the $23.5 billion SoftBank Corp offering (9434 JP). The fixed price IPO will make SoftBank’s mobile unit the largest Japanese IPO and the second biggest in history, just steps away from Alibaba’s $25 billion offering in 2014.

Select IPOs traded (week: 12/10/2018) Domicile
Fosun Tourism Group China
Tencent Music Entertainment Group China
Select IPOs expected (week: 12/17/2018) Domicile
Softbank Corp Japan

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