Earnings drive solid overall returns as IPOX Indexes enter U.S. option expiration week at record levels. Amid earnings season and perceived corporate action activity in select holdings, the returns of individual securities comprised in the IPOX Indexes diverged sharply last week. In the IPOX U.S. Indexes universe, for example, big earnings-driven declines in social networker Twitter (TWTR US: -11.53%), travel technology provider Sabre (SABR US: -8.63%) or beauty products producer Coty (COTY US: -5.77%) were more than offset by big gains in optical communications components maker Lumentum (LITE US: +22.14%), Chicago-based IT service provider CDW (CDW US: +10.05%) or publisher NEWS Corp (NWSA US: +8.31%). Solid returns in consumer staple Burger King/Tim Hortons tie-up Restaurant Brands (QSR US: +3.50%) supported, as activist investor activity pushed the stock to a fresh all-time high. In markets outside the U.S., we note the big gains in China-linked exposure, with the IPOX China (CNI) surging +3.45% to +9.20% YTD. Return drivers here included industrial China Railway (3969 HK: +9.65%), Twitter-contrast social networker Weibo (WB US: +9.37%) or car maker BAIC Motor (1958 HK: +9.35%), while recent Spin-off Yum China (YUMC US: -6.58%), Danish IPO payment processor NETS A/S (NETS DC: -6.70%) or Dutch Financial ABN AMRO (ABN NA: -4.00%) slumped.
|IPOX Returns (%) (P)||Week||2017||2016|
|Exposure: Global/International (xUS) (USD)|
|IPOX Global 50 (IPGL50)||0.54||5.05||-2.50|
|IPOX Global 30 (IPGL30)||0.71||4.56||1.73|
|IPOX Intern. (IPXI)*||0.52||6.78||-4.63|
|Exposure: United States|
|IPOX Composite U.S. (IPXC)*||1.01||6.52||7.24|
|IPOX 100 U.S. (IPXO)*||0.55||4.09||5.89|
|IPOX 30 U.S. (IPXT)||0.92||3.93||8.44|
|Exposure: Europe/Nordic Region|
|IPOX Europe (IXTE)||0.17||3.75||0.18|
|IPOX Nordic (IPND)||0.18||3.73||-1.59|
|Exposure: Asia-Pacific/China Region|
|IPOX Asia-Pacific (IPTA)||0.94||4.57||-1.96|
|IPOX China C. (IPXUCHCHP)*||2.41||8.61||-3.73|
|IPOX China (CNI)||3.45||9.20||-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-linked investment products mirror gains. IPOX-linked Financial Products mirrored the strong sentiment at the overall IPOX Indexes level: For example, available to investors in the U.S. and Europe, the USD million 662, 5-star First Trust U.S. Equity Opportunities ETF (FPX US, FPX LN) added +0.57% to +4.14% YTD, a new all-time closing high, while the Catalyst IPOX Allocation Fund (OIPAX), an active IPOX-linked mutual fund, added +0.84% to +3.63% YTD. International exposure outperformed the U.S. anew with the IPOX-linked First Trust International IPO ETF (FPXI) gaining +0.77% to +7.27% YTD.
Amid soaring number of high profile U.S. IPO filings, little deal flow seen this week. At least 8 significant, accessible (non China A-shares) IPOs commenced trading last week with the average (median) equally-weighted firm dropping by -2.26% (+1.15%) based on the difference between the final offering price and Friday’s close. The disappointing (and rare) overall negative picture was caused by declines in respective Hong Kong-traded micro-/small-caps construction sub-contractor Royal Deluxe Holdings (3789 HK: -16.07%) and construction and mining machinery trader Sanroc International (1660 HK: -22.50%). The initial showing of firms traded in the Americas was better, with the weeks most significant deal – the IPO of one of the world’s leading tequila makers USD million 800 Jose Cuervo (CUERVO* MM: +4.76%) on the Mexican stock exchange – closing the week solidly above offer. U.S. deal flow was muted: After the last-minute acquisition of industrial packaging products maker Mauser at a big premium to its perceived initial stock market valuation, REIT USD million 618 Clipper Realty Inc. (CLPR US) and specialty building products distributor USD million 663 Foundation Building Materials (FBM US) were the only IPOs on an U.S. exchange. Amid the slew of U.S IPO filings during last week including Brazilian Airline Azul, oil and gas services providers ProPetro and FTS International, real estate services provider Newmark Grubb Knight Frank, building products maker FDO or specialized apparels retailer Jill Intermediate, U.S. IPOs are absent for this week. Deals abroad include another China-linked educational services provider IPO (Dadi Education [8417 HK]), as well as H.K. health care facilities operator Pine Care Group (1989 HK).
|Traded IPOs (week of 02/06/2017)||Country|
|Becle SAB de CV||Mexico|
|Clipper Realty Inc.||United States|
|Detsky Mir PJSC||Russia|
|Foundation Building Materials Inc.||United States|
|Movida Participacoes SA||Brazil|
|Mori Trust Hotel REIT Inc.||Japan|
|Royal Deluxe Holdings Ltd.||Hong Kong|
|Sanroc International Holdings Ltd.||Hong Kong|
|Upcoming IPOs (week of 02/13/2017)||Country|
|Hao Bai International Cayman Ltd.||Hong Kong|
|Dadi Education Ltd.||Hong Kong|
|Pine Care Group 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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