The IPOX® Week, February 06, 2017

  • Earnings, Momentum propel IPOX 100 U.S. Index (IPXO) to strong week, FPX closes at all-time high.
  • IPOX Europe Index (IXTE) extends YTD gains.
  • Snap (SNAP US) files landmark IPO. U.S. IPO window open as most deals get done. More IPOs lined up.

Earnings, Momentum propel IPOX 100 U.S. Index (IPXO) to strong week, FPX closes at all-time high. The IPOX 100 U.S. Index (IPXO) extended the YTD gains last week, as solid earnings and momentum propelled the index to an all-time closing high. The Index – key benchmark for the performance of U.S. IPOs and Spin-offs – rose +0.74% to +3.52% YTD, exceeding the return of the major U.S. equity benchmarks by between +21 bps. (Russell 2000) and +86 bps. (Nasdaq 100). Strong earnings in select Spin-offs drove the relative gain, including Financial Ally (ALLY US: +15.22%), specialty chemicals maker The Chemours Co. (CC US: +8.78%) and consumer staple, Chicago, IL-based potato processor Lamb Weston (LW US: +6.75%). A good week in heavily weighted drug/pharma producers supported, including Abbvie (ABBV US: +1.12%) and Shire (SHPG US: +2.02%). Most weakness originated from high-beta exposure ahead of earnings, including communications equipment maker Acacia Communications (ACIA US: -6.12%). In all, 66% of all index holdings rose, with the average (median) equally-weighted stock gaining +0.91% (+0.88%), slightly ahead of the applied market-cap. weighted IPOX 100 U.S. Index (IPXO). IPOX-linked Financial Products mirrored the strong sentiment: For example, available to investors in the U.S. and Europe, the USD million 659, 5-star First Trust U.S. Equity Opportunities ETF (FPX US, FPX LN) rose +0.74 to % +3.55% YTD, a new all-time closing high, while the Catalyst IPOX Allocation Fund (OIPAX), an active IPOX-linked mutual fund, added +1.28% to +2.76% YTD.

IPOX Returns (%) (P) Week 2017 2016
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) 0.25 4.44 -2.50
IPOX Global 30 (IPGL30) 0.08 3.78 1.73
IPOX Intern. (IPXI)* 0.39 6.12 -4.63
Exposure: United States
IPOX Composite U.S. (IPXC)* 0.59 5.46 7.24
IPOX 100 U.S. (IPXO)* 0.74 3.52 5.89
IPOX 30 U.S. (IPXT) 0.43 2.98 8.44
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 0.06 3.55 0.18
IPOX Nordic (IPND) 0.63 3.55 -1.59
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) 0.87 3.45 -1.96
IPOX China C. (IPXUCHCHP)* -0.36 6.09 -3.73
IPOX China (CNI) -0.31 5.57 -10.21

* 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 [IPOH7]).

IPOX Europe Index (IXTE) extends YTD gains. We continue to note with interest the big relative return gains in European IPOs and Spin-offs as measured by the IPOX Europe (IXTE), with the index rising +0.06% to +3.55% YTD last week, now a large +365 bps. ahead of the European market YTD. Recent specialty IPOs led the gains, including Italian luxury car maker Ferrari (RACE US: +5.26%) or Stockholm-traded Industrial products maker Ahlsell (AHSL SS: +2.93%).

Snap (SNAP US) files landmark IPO. U.S. IPO window open as most deals get done. More IPOs lined up. At least 6 significant, accessible (non China A-shares) IPOs commenced trading last week with the average (median) company gaining +11.87% (+8.91%) based on the difference between the final offering price and Friday’s close. With the exception of educational services provider Laureate Education (LAUR US: -5.21%), all deals rose based on offer with most initial upside recorded by Indian stock exchange operator BSE (BSE IN: +32.66%). We also note Thursday’s IPO filing of social networker Snap (SNAP US). Amid an underwhelming nominal level of revenue, but an explosive revenue growth rate, the firms is set to price its March/April IPO at approximately 50 times ‘16 total sales. More companies are lined up to go public during this week: Top of the list ranks foreign-domiciled Mauser Group (MSR US), a global supplier of rigid packaging products and services for industrial use, and building products distributor CA-based Foundation Building Materials (FBM US). Deals outside the U.S. include the REIT of Tokyo-traded Mori Trust Hotel (3478 JP), and H.K-traded small caps construction sub-contractor Royal Deluxe (3789 HK) and apparel supply chain management services provider Speed Apparel (8183 HK).

Traded IPOs (week of 01/30/2017) Country
BSE Ltd India
Freshii Inc Canada
Invitation Homes Inc United States
Kimbell Royalty Partners LP United States
Laureate Education Inc United States
Ramaco Resources Inc United States
Upcoming IPOs (week of 02/06/2017) Country
AlzChem AG Germany
Clipper Realty Inc. United States
Foundation Building Materials LLC United States
Mori Trust Hotel REIT Inc. Japan
Mauser Group BV United States
Royal Deluxe Holdings Ltd. Hong Kong
Speed Apparel Holding Ltd. Hong Kong

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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