The IPOX® Week, February 20, 2017

  • Perceived corporate actions and earnings leave IPOX Indexes on top of weekly performance rankings.
  • IPOX-linked investment products mirror the big gains.
  • Shortened U.S. trading week sees few IPOs, Snap Inc. set to list March 2, 2017.

Perceived corporate actions and earnings leave IPOX Indexes on top of weekly performance rankings. Solid Earnings amongst key portfolio holdings and big perceived corporate action activity left the IPOX Indexes on top of the weekly benchmark performance rankings. Most relative upside was recorded by the IPOX U.S. Indexes (IPXC, IPXO, IPXT), with the diversified USD trillion 1.2 IPOX 100 U.S. Index surging by +2.17% to +6.35% YTD, +66 bps. ahead of the S&P 500 Index (SPX), the main gauge for U.S. stocks. Big contributor to returns was consumer staple Spin-off Kraft Heinz (KHC US: +7.15%), similar to Berkshire Hathaway (BRK/B: +2.78%), also IPOX’s most heavily weighted portfolio holding. After a volatile week, the stock surged towards the week-end on reports of a merger approach with British consumer staple behemoth Unilever (ULVR LN: +14.70%). Other IPOX U.S. Index holdings with big upside included communication equipment makers Arista Networks (ANET US: +20.53%) and Acacia Communications (ACIA US: +18.85%), as well as Spin-off The Chemours Company (CC US: +17.53%). Specialty pharma constituent 01/2013 IPO Zoetis (ZTS US: -5.78%) fell sharply after reporting weak earnings. In all 63% of IPOX 100 U.S. Index (IPXO) members rose on the week, with the average (median) equally-weighted stock gaining +1.38% (+0.79%), significantly lagging the applied market-cap weighted index.

IPOX Returns (%) (P) Week 2017 2016
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) 1.51 6.64 -2.50
IPOX Global 30 (IPGL30) 1.74 6.33 1.73
IPOX Intern. (IPXI)* 0.66 7.48 -4.63
Exposure: United States
IPOX Composite U.S. (IPXC)* 1.47 8.08 7.24
IPOX 100 U.S. (IPXO)* 2.17 6.35 5.89
IPOX 30 U.S. (IPXT) 2.43 6.46 8.44
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -0.48 3.27 0.18
IPOX Nordic (IPND) 1.07 4.84 -1.59
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) 0.37 4.82 -1.96
IPOX China C. (IPXUCHCHP)* -0.07 8.51 -3.73
IPOX China (CNI) 1.39 10.67 -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 the big gains. IPOX-linked investment products mirrored the big gains in the underlying IPOX Indexes. For example, available to investors in the U.S. and Europe, the USD million 671, 5-star First Trust U.S. Equity Opportunities ETF (FPX US, FPX LN) closed at a fresh all-time time, adding +2.18% to +6.41% YTD, while its international counterpart (FPXI US) added +0.36% to +7.66% YTD. The IPOX Allocation Fund (OIPAX), an actively managed mutual fund available to investors in the U.S., added +1.33% +5.01% YTD.

Shortened U.S. trading week sees few IPOs, Snap Inc. set to list March 2, 2017. At least 7 significant, accessible (non China A-shares) IPOs commenced trading last week with the average (median) equally-weighted firm gaining +14.57% (+10.07%) based on the difference between the final offering price and Friday’s close. Most initial upside was recorded by JASDAQ-traded communications services provider small-cap Nissen Inc. (6543 JP: +66.88%). Ahead of the shortened U.S. trading week, we note a number of notable IPO filings in international markets including Shell Spin-off, Dutch-based specialty chemicals maker Avantium Holdings and African Financial Services firm I&M Bank Rwanda, promising to re-open the IPO window for firms on the African continent. Filing activity remained brisk for deals in the United States and included oil & gas services provider Liberty Oilfield Services LLC, high-end Canada-domiciled apparel maker dual-listing Canada Goose Inc. and enterprise software maker MuleSoft Inc. No significant (non China-A Shares) IPOs are scheduled for the upcoming week. Companies lined up towards the end-of the month/beginning of next month include alternative asset manager Hamilton Lane (HLNE US), Vietnamese international low-cost airline Vietjet Aviation JSC (VJC VN), as well as U.S. social networker Snap (SNAP US), which has set its IPO pricing date for Wednesday, March 1, 2017 with trading set to commence Thursday, March 2, 2017, slightly earlier than had been expected. The company last week updated its IPO filing and specified the initial price range for the stock, envisioning a total initial market cap. between USD billion 20-22 (or ca. 50 times 2016 sales) and raising ca. USD billion 3.2 in the process.

Traded IPOs (week of 02/13/2017) Country
Dadi Education Holdings Ltd. Hong Kong
New Age Beverages Corp. United States
Nissen Inc. Japan
Inventiva SA France
Instituto Hermes Pardini SA Brazil
Pine Care Group Ltd. Hong Kong
Xafinity PLC United Kingdom
Upcoming IPOs (week of 02/20/2017) Country
Able Engineering Holdings Ltd. Hong Kong
GEM Group Holdings Hong Kong
Oncopeptides AB Sweden

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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