The IPOX® Week, July 02, 2018

  • IPOX Indexes extend weakness into quarter-end, China-linked exposure slides anew.
  • IPOX 100 U.S. ETF (FPX) posts strong quarterly gain.
  • IPO Deal-flow Review & Outlook: U.S. shows strength as deals surge. Ahead of massive IPO, Chinese smartphone giant Xiaomi (1810 HK) prices Hong Kong IPO at low end.

IPOX Indexes extend weakness into quarter-end, China-linked exposure slides anew. Continued selling in China-linked exposure on rising trade tensions and profit taking in select high-beta names continued to pressure the IPOX Indexes into quarter end. Weakness extended across regions. In the U.S., e.g., the FAANG-free, style agnostic IPOX 100 U.S. (IPXO) shed -1.96% to +4.87% YTD, lagging the S&P 500 (SPX) – benchmark for U.S. stocks – by -63 bps. on the week, however, remained +194 bps. ahead of the S&P 500 (SPX) during Q2. Here, losses were driven by big declines in small- and mid-cap high beta exposure with 77/100 portfolio holdings closing the week in negative territory. Most pressure amongst individual stocks was on HFT Virtu Financial (VIRT US: -10.91%), social networker Match Group (MTCH US: -9.30%) or e-commerce firm StichFix (SFIX US: -8.99%), while pending corporate actions linked to entertainment facilities operator Madison Square Garden (MSG US: +11.32%) or drug maker IPOX heavyweight Shire (SHPG US: +4.29%) helped to mitigate portfolio losses. In non-U.S. domiciled exposure, while China-linked stocks including e-commerce behemoth Alibaba (BABA US: -8.16%) continued to trade under pressure, we note significant upside in select Japan-traded IPOX portfolio holdings, including application software maker PKSHA Technology (3993 JP: +21.07%), industrial machinery maker Optorun (6235 JP: +6.23%) or logistics firm SG Holdings (9143 JP: +3.23%).

IPOX 100 U.S. ETF (FPX) posts strong quarterly gain. The USD billion 1.2 IPOX 100 U.S. (IPXO)-linked First Trust U.S. Equity Opportunities ETF (FPX) fell to +5.10% YTD last week, recording a quarterly gain of +4.46%, while its international version (FPXI) fell to -0.91% YTD (-5.68% last quarter). Amongst IPOX-linked actively managed funds, the Catalyst IPOX® Allocation Fund (OIPAX) fell to +8.68% YTD last week, with exposure to immediate U.S. IPO deal flow propelling the fund to a quarterly gain of a strong +7.44%.

IPOX® 100 U.S. – Investing with the “FPX” ETF since 2006

IPOX Price Returns (%) Last Week 2017 2018 YTD
Exposure: Global/International (xUS) (USD) (Price)
IPOX Global (IPGL50) -2.57 28.59 -0.11
IPOX International (IPXI)* -2.94 37.80 -1.83
Exposure: United States (USD) (Price)
IPOX Composite U.S. (IPXC)* -2.99 33.64 5.89
IPOX 100 U.S. (IPXO)* -1.96 26.04 4.87
IPOX 30 U.S. (IPXT) -1.58 26.63 1.49
Exposure: Europe/Nordic Region (EUR) (Price)
IPOX Europe (IXTE) -1.68 19.27 1.53
IPOX Nordic (IPND) -1.61 17.91 -0.42
Exposure: Asia-Pacific/China Region (USD) (Price)
IPOX Asia-Pacific (IPTA) -1.82 23.30 -0.88
IPOX China (CNI) -5.72 37.67 6.34

* 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: IPOU8].

IPO Deal-flow Review & Outlook: U.S. shows strength as deals surge. Ahead of massive IPO, Chinese smartphone giant Xiaomi prices Hong Kong IPO at low end: A massive 27 (non-China A shares and non-local India) firms debuted last week across accessible regions, with the average (median) equally-weighted firm adding +9.53% (+0.67%) based on the difference between the final offering price and Friday’s close. While IPOs in foreign markets generally debuted lackluster, select deals in the U.S. soared anew, including U.S. biopharma Tricida (TCDA US: +57.37%) or retailer BJ’s (BJ US: +39.12%). Amid the shortened U.S. trading week, focus this week is on deals outside the U.S. (see next page). We also note the upcoming IPO of Chinese smartphone marker Xiaomi (1810 HK). Priced at the low end, the company’s market cap. was set at ca. ½ of its $100 billion valuation previously. Shares will commence trading on the Hong Kong Stock Exchange on, Monday July 9th.

Select IPOs traded (week: 06/18/2018) Country
Akasol AG Germany
Amigo Holdings PLC Britain
BJ’s Wholesale Club Holdings I United States
BrightView Holdings Inc United States
DM Wenceslao and Associates In Philippines
Domo Inc United States
Forty Seven Inc United States
IPL Plastics Inc Canada
Jiangxi Bank Co Ltd China
Neuronetics Inc United States
Quilter PLC Britain
Sprix Ltd Japan
Translate Bio Inc United States
Tricida Inc United States
Uxin Ltd China
Wise Talent Information Techno China
Select IPOs expected (week: 07/02/2018) Country
Pivotal Systems Corp United States
Propnex Ltd Singapore
Okeanis Eco Tankers Corp Greece
Qeeka Home Cayman Inc China
Steve Leung Design Group Ltd Hong Kong
China Isotope & Radiation Corp China

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.

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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