The IPOX® Week, February 12, 2018

  • Amid slump in equities, blockbuster earnings propel IPOX 100 U.S. Index to big weekly relative performance jump.
  • Late Friday’s CDK Global Buy-Out News set to add to list of takeovers amongst IPOX 100 U.S. Portfolio Holdings.
  • IPO Deal-flow Review & Outlook: Deals debut mixed on jump in risk; Hong Kong set for wave of small-cap IPOs.

Amid slump in equities, blockbuster earnings propel IPOX 100 U.S. Index (IPXO) to big weekly relative performance jump. Broad-based, asset allocation driven selling in global equities amid increasing inflationary expectations and a new Fed chair pressed the IPOX Indexes to a second week of steep losses. Strong earnings and stock selection, however, helped to mitigate losses in some of the key IPOX Indexes. In the U.S., for example, the IPOX 100 U.S. (IPXO) – underlying benchmark for the USD billion 1.01 First Trust U.S. Equity Opportunities ETF (ticker: FPX) – fell -3.77% to +0.33% YTD, remaining in positive territory YTD, while holding the key 3000.00 mark, outpacing the performance of U.S. equities as measured by the S&P 500 Index (SPX) by a large +139 bps. on the week. With the plunge in exchange operator Cboe Global Markets (CBOE: -20.45%) weighing, select IPOX 100 U.S. (IPXO) exposure jumped despite the sell-off after earnings and helped to drive the strong relative return on the week. Exposure with most upside included high frequency trading firm Virtu Financial (VIRT US: +44.07%), 2nd generation social networkers Snap (SNAP US: +37.13%) and Twitter (TWTR US: +21.57%) or optical communications components maker Lumentum (LITE US: +27.54%). We also note the fresh all-time high in Chicago-based online food-delivery platform operator GrubHub (GRUB US: +21.08%) after a strong quarterly report and inking a USD million 200 investment deal with restaurant operator Yum China (YUMC US: -11.55%).

Late Friday’s CDK Global (CDK US) buy-out news set to add to list of takeovers amongst IPOX 100 U.S. (IPXO) Portfolio Holdings. News reported by Bloomberg pertaining to the takeover of IL-based application software maker Spin-off CDK Global (CDK US: -2.69%) at a significant premium by private equity continued to improve IPOX 100 U.S. (IPXO) sentiment. This follows on the January 2018 pending acquisition of Spin-off biotech Bioverativ (BIVV US: -0.90%) by French pharma maker Sanofi (SAN FP: -11.22%) at a massive ca. +62% premium.

IPOX Price Returns (%) Last Week 2017 2018 YTD
Exposure: Global/International (xUS) (USD)
IPOX Global (IPGL50) -5.55 28.59 0.44
IPOX International (IPXI)* -7.27 37.80 0.55
Exposure: United States (USD)
IPOX Composite U.S. (IPXC)* -4.64 33.64 -0.09
IPOX 100 U.S. (IPXO)* -3.77 26.04 0.33
IPOX 30 U.S. (IPXT) -4.54 26.63 0.00
Exposure: Europe/Nordic Region (EUR)
IPOX Europe (IXTE) -4.90 19.27 -2.42
IPOX Nordic (IPND) -2.62 17.91 -2.07
Exposure: Asia-Pacific/China Region (USD)
IPOX Asia-Pacific (IPTA) -6.71 23.30 -0.44
IPOX China C. (IPXUCHCHP)* -7.95 42.57 -0.74
IPOX China (CNI) -9.50 37.67 0.00

* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT and CME listed e-mini IPOX 100 U.S. Index Futures [Symbol: IPOH8].

IPO Deal-flow Review & Outlook: Deals debut mixed on jump in risk; Hong Kong set for wave of small-cap IPOs. At least 12 notable (non-China A shares and non-local India) firms commenced trading last week with the average (median) equally-weighted IPO gaining/falling by -1.24% (0.00%) based on the difference between the final offering price and Friday’s close. Amid the delay of ca. 30% of scheduled deals due to market volatility, most upside focus was on flow control equipment maker Houston-based Cactus (WHD US: +7.37%) after upsizing the deal and pricing on top of expected range. Ahead of the slew of New Listings in the Hong Kong Market amid Chinese New Year, non-US domiciled deals significantly underperformed their U.S. counterparts, including Hong Kong-based real estate services firm A-Living Services (3319 HK: -23.09%) and respective European-based firms including Spanish real estate developer Metrovacesa (MVC SM: -6.06%) or Germany’s pharma maker Dermapharm (DMP GR: -6.43%). With no significant IPOs scheduled to debut in the U.S., focus this week is on deals in Europe and Asia-Pacific, including Germany’s real estate developer Instone Real Estate (INS GR), French auto parts maker Novares Group (NVS FP) or South Koreas pharma maker Korea Arlico Pharm (260660 KS). Amid Chinese New Year, Hong Kong is set for a wave of micro- small-cap deals, including electrical components maker Time Interconnect Technology (1729 HK).

Select IPOs traded (week: 02/05/2018) Country
A-Living Services C China
Cactus Inc U.S.A.
Cardlytics Inc U.S.A.
CFE Capital S de RL de CV Mexico
CRE Logistics REIT Inc Japan
Dermapharm Holding Germany
Enerjisa Enerji AS Turkey
Evolus Inc U.S.A.
Huami Corp China
Metrovacesa S.A. Spain
Pinnacle Renewable Holdings Inc Canada
Quintana Energy Services Inc U.S.A.
Select IPOs expected (week: 02/12/2018) Country
ASIA SEED Co Ltd South Korea
Instone Real Estate Group BV Germany
Korea Arlico Pharm Co Ltd South Korea
MECOM Power and Construction Ltd Macau
Motus GI Holdings Inc Israel
Novares Group SAS France
Purcari Wineries PLC Moldova
Time Interconnect Technology Ltd Hong Kong
Vico International Holdings Ltd Hong Kong
XYMAX REIT Investment Corp Japan

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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