The IPOX® Week, January 23, 2017

  • IPOX Indexes close mixed during expiration week. IPOX China extends YTD gains.
  • As new U.S. administration takes helm, U.S. IPO window set to open with flood of deals, big initial returns.

IPOX Indexes close mixed during expiration week. IPOX China extends YTD gains. The IPOX Indexes traded mixed last week with the IPOX Global (IPGL50) shedding -0.33% to 2.60% YTD, +61 bps. ahead of the global market. Continued gains in China-linked exposure (CNI: +1.37%) and a flat Europe (IXTE: +0.01%) were offset by weakness in the IPOX U.S. (IPXO, IPXT) and IPOX Developed Asia-Pacific (IPTA). Individual stocks with most upside focus included some of the more recent new listings in the mid-cap space, such as U.S. base metals producer spin-off Alcoa (AA US: +8.03% ahead of earnings), Bayer spin-off Covestra (1COV GY: +8.31% on upgrades), 12/16 IPO Chinese mobile application software maker H.K. traded Meitu (1367 HK: +7.30% on a big spike in volume as Chinese Investment banks initiate ratings) or Chinese courier services operator 10/16 IPO ZTO Express Cayman (ZTO US: +5.92% as it exented YTD momentum). Global specialty car parts makers also recorded strong gains, including recent Johnson Controls 10/16 spin-off Adient (ADNT US: +4.51% on positive analyst comments) and Germany’s Hella (HLE GY: +4.74%). We note the fresh post-merger high in global data provider IHS Markit (INFO US: +4.75% after delivering a strong quarterly report, including a revenue beat). Some of the strength was mitigated by weakness in select IPOX heavyweights including IL-based drug makers Abbvie (ABBV US: -1.36% ahead of earnings), Shire (SHPG US: -5.00% in sympathy with drug maker Mallinckrodt [MNK US: -9.00%]) and the slew of 2015 Japanese privatization IPOs which declined on secondary share sale expectations. IPOX-linked Financial Products traded on the international exchanges mirrored this mixed sentiment: For example, available to investors in the U.S. and Europe, the USD million 633 First Trust U.S. Equity Opportunities ETF (FPX) declined -0.20% +1.70% YTD, in line with the ETF linked to the S&P 500 (SPY), main gauge for U.S. stocks.

IPOX Returns (%) (P) Week 2017 2016
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -0.33 2.60 -2.50
IPOX Global 30 (IPGL30) 0.07 2.56 1.73
IPOX Intern. (IPXI)* -0.14 3.38 -4.63
Exposure: United States
IPOX Composite U.S. (IPXC)* -0.34 3.06 7.24
IPOX 100 U.S. (IPXO)* -0.25 1.65 5.89
IPOX 30 U.S. (IPXT) -0.47 1.46 8.44
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 0.01 1.72 0.18
IPOX Nordic (IPND) 0.05 1.28 -1.59
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -1.20 2.28 -1.96
IPOX China C. (IPXUCHCHP)* 0.31 4.11 -3.73
IPOX China (CNI) 1.37 4.73 -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]).

As new U.S. administration takes helm, U.S. IPO window set to open with flood of deals, big initial returns. The start of the new U.S. government cycle is set to have a significantly positive impact on U.S. IPO flow, with at least 8 firms set to commence trading. The largest deal of the week belongs to Citi/CS and JP Morgan-led non-dividend paying growth-oriented independent oil and natural gas firm Jagged Peak Energy (JAG US) which seeks to raise USD million 649.8 (middle of the USD 16-18 range), with procceds going to the firm earmarked to reduce debt. Goldman-led intelligence software platform operator AppDynamics (APPD US) is also lined up for a Thursday debut, with the firm seeking to sell just 11.88% of equity at a valuation between USD billion 1.26-1.51 or ca. 9-10 times ‘16 revenues. Given the structure of the offering and valuation, we expect the deal to rank as the week’s hottest. IPOs linked to other sectors such as manufacturing include dividend-paying Goldman-led Milwaukee-based REV Group (REVG US), a manufacturer of emergency and specialty vehicles and Charloette-based, Barclays-led JELD-WEN Holding (JELD US), a global manufacturer of doors and windows. Smaller deals seeking to raise less than USD million 100 include high-risk/return clinical-stage biotech offerings such as Switzerland-based ObsEva (OBSV US) and U.S.-domiciled Jounce Therapeutics (JNCE US), AnaptsysBio (ANBA US) and Visterra (VIST US).

Traded IPOs (week of 01/16/2017) Country
Dasin Retail Trust Singapor
Keane Group Inc. United States
New Century Healthcare Holding Co. Ltd. Hong Kong
Zhi Sheng Group Holdings Ltd. Hong Kong
Upcoming IPOs (week of 01/23/2017) Country
AnaptysBio Inc. Hong Kong
AppDynamics Ind. Hong Kong
Jagged Peak Energy Inc. United States
JELD-WEN Holding Inc. United States
Jounce Therapeutics Inc. United States
ObsEva SA Switzerland
REV Group Inc. United States
Visterra Inc. United States
Wisdom Education International Holdings 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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