The IPOX® Week, February 19, 2018

  • Earnings trump inflation as IPOX Indexes stage massive rally during U.S. Option expiration week.
  • IPOX-linked ETFs (FPX, FPXI) mirror the big gains in underlying IPOX Indexes.
  • Deal-flow: Light, no significant IPOs lined up.

Earnings trump inflation as IPOX Indexes stage massive rally during U.S. Option expiration week. The IPOX Indexes staged a massive rally last week as inflationary concerns subsided, rates stabilized and the market re-focused on overall strong fundamentals. Weakness in select IPOX holdings towards the week-end soured the overall strong sentiment, however. On the global level, e.g., the IPOX Global 50 (IPGL50) – benchmark for the performance of the largest global IPOs and Spin-offs using the IPOX® Indexes Technology – rose +4.76% to +5.22% YTD, +335 bps. ahead of the global market YTD. While the IPOX U.S. (IPXC, IPXO, IPXT) followed in step with the strong gains in U.S. equities, significant relative upside was recorded by the IPOX International (IPXI), which jumped +5.32% to +5.90% YTD, now +421 bps. ahead of the international market YTD. The strong showing was driven by significant gains in China-linked social media platform operator Weibo (WB US: +16.81%) and specialty exposure such as Canada-based cloud-based commerce platform Shopify (SHOP US: +15.04%), high-end fashion makers Canada-based Canada Goose (GOOS US: +11.62%) and Italy-based Moncler (MONC IM: +10.61%) or U.K.-based food delivery platform operator Just Eat (JE/ LN: +10.31%), which continued to ascend in unison with IPOX 100 U.S. (IPXO) portfolio holding U.S. pendant Chicago-based GrubHub (GRUB US: +12.15%). Financials and Materials exposure lagged, including Australian base metal producer Spin-off South32 (S32 AU: -9.29%). In the IPOX 100 U.S. (IPXO), just 10/100 firms closed the week in negative territory with the average (median) equally-weighted firm adding +4.72% (+4.18%) on the week. Friday’s earnings-driven declines in IPOX heavyweight consumer staple Kraft Heinz (KHC US: -0.81%), communications equipment maker Arista Networks (ANET US: -8.46%) or infrastructure software firm LOGMEIN (LOGM US: -0.04%) soured the sentiment into the week-end.

IPOX® 100 U.S. Investing with the 5-star “FPX” ETF since 2006

IPOX-linked ETFs jumped last week: For example, the NYSE-listed USD billion 1.07 First Trust U.S. Equity Opportunities ETF (FPX) – which tracks the IPOX® 100 U.S. (IPXO) – rose to +4.75% YTD, while the NASDAQ-listed First Trust International IPO ETF (FPXI) – which tracks the IPOX® International (IPXI) – jumped to +6.85% YTD.

IPOX Price Returns (%) Last Week 2017 2018 YTD
Exposure: Global/International (xUS) (USD)
IPOX Global (IPGL50) 4.76 28.59 5.22
IPOX International (IPXI)* 5.32 37.80 5.90
Exposure: United States (USD)
IPOX Composite U.S. (IPXC)* 5.00 33.64 4.91
IPOX 100 U.S. (IPXO)* 4.40 26.04 4.74
IPOX 30 U.S. (IPXT) 4.37 26.63 4.37
Exposure: Europe/Nordic Region (EUR)
IPOX Europe (IXTE) 4.13 19.27 1.62
IPOX Nordic (IPND) 3.49 17.91 1.34
Exposure: Asia-Pacific/China Region (USD)
IPOX Asia-Pacific (IPTA) 3.50 23.30 3.04
IPOX China (CNI) 8.60 37.67 8.61

* 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: Light deal flow, no significant IPOs lined up. At least 7 notable (non-China A shares and non-local India) firms debuted last week with the average (median) equally-weighted firm adding +45.12% (+16.00%) based on the difference between the final offering price and Friday’s close. Most upside was recorded by the microcap pharma IPOs Korean Arlico Pharm (260660 KS: +113.33%) and Dongkoo Bio & Pharma (006620 KS: +146.56%). European deals trended weaker, however, with downsized Germany’s real estate developer Instone Real Estate (INS GR: -2.33%) finishing the week below final offer, while French auto parts maker Novares Group canceled its relaunched IPO last week due to adverse market conditions. Amid Lunar New Year holiday, most Asian stock markets were closed and will resume for business on Feb 20th. U.S. markets will also have a shorten trading week due to Presidents Day. Focus this week is on just one deal, the IPO of U.K. based lending services provider TruFin (TRU LN).

Select IPOs traded (week: 02/12/2018) Country
Biofrontera AG Germany
Dongkoo Bio & Pharma 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
Purcari Wineries PLC Moldova
Time Interconnect Technology Ltd Hong Kong
Select IPOs expected (week: 02/19/2018) Country
TruFin PLC Britain

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.

Lime Brokerage LLC is not affiliated with these service providers. Data, information, and material (“content”) is provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer or recommend any of the services provided by any of the above service providers and any service used to execute any trading strategies are solely based on the independent analysis of the user.

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