The IPOX® Week, June 27, 2016

  • Brexit hits stocks; IPOX Indexes fall across the board.
  • Significant deal flow prices, focus on REITs, TWLO US.
  • More IPOs lined, US focus on Tactile Systems.

Brexit hits stocks; IPOX Indexes fall across the board. The IPOX Indexes followed the massive reversal in global equites towards the week-end on Brexit, with select IPOX Indexes lagging the benchmarks. In the U.S., e.g., the IPOX 100 U.S. (IPXO) – underlying for the First Trust U.S. IPO ETF (FPX) – shed -2.05% to -3.96% YTD, in line with the Nasdaq 100 (QQQ) but lagging the S&P 500 (SPX) for a third week in a row. Weakness here was broad-based with 71/100 companies recording a negative close on the week and the average (median) equally-weighted stock declining -1.67% (-1.37%), less than when compared to the applied market-cap weighted index. Big declines in more heavily weighted firms weighed on index performance, with First Data (FDC US: -7.64%), NXPI (NXPI US: -5.82%), PayPal (PYPL US: -5.11%) or Hewlett Packard Enterprises (HPE US: -4.12%) leading the way. Companies with most upside focus included spin-offs Post Holdings (POST US: +4.05%) and CSRA (CSRA US: +3.35%), while Twitter (TWTR US: +2.11%) continued to build momentum. IPOX Indexes in other world regions also weakened with respective regional exposure declining in line to more than the benchmarks, as investors continued to shed high-beta growth stocks and Financials on Brexit and quarterly portfolio re-balancing. Companies recording large losses included last year’s Japanese privatization offerings Japan Post Holdings (1184 JP: -6.25%), Japan Post Insurance (1991 JP: -7.87%) and Japan Post Bank (7182 JP: -4.15%), as well as the slew of recent Chinese regional banking offerings, including Bank of Jinzhou (416 HK: -7.45%), Bank of Qingdao (3866 HK: -6.05%) and Shengjing Bank (2066 HK: -5.71%). IPOs traded in the Nordic Region bucked the weakness and traded with most upside last week, including Valmet (VALMT FH: +14.47%), Lifco (LIFCOB SS: +12.02%) and Evolution Gaming (EVO SS: +10.54%).

IPOX Returns (%) (P) Week 2015 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -2.58 0.99 -10.62
IPOX Intern. (IPXI)* -2.61 -5.85 -11.04
Exposure: United States (USD)
IPOX US Comp. (IPXC) -1.59 -3.90 -3.62
IPOX 100 U.S. (IPXO)* -2.05 1.57 -3.96
IPOX 30 U.S. (IPXT) -2.82 4.91 -4.57
Exposure: Europe (EUR)
IPOX Europe (IXTE) -2.65 14.41 -13.62
IPOX Nordic (IPND) -1.69 23.88 -6.79
Exposure: Asia-Pacific (Developed) (USD)
IPOX Asia-Pacific (IPTA) -1.64 -2.32 -4.27
Exposure: China (USD) (x A-Shares)
IPOX China (CNI) -0.56 -9.10 -15.96

*Basis for Exchange-Traded Products (ETPs)

Significant deal flow prices, focus on REITs, TWLO US. At least 14 significant IPOs priced in the accessible (non-China A Shares) markets last week, with the average (median) deal gaining +30.90% (+1.40%) based on the difference between the final offering price and the close on the week. U.S. focus was on the stellar initial performance of Goldman Sachs-led global applications software maker Twilio (TSLO US: +75.33%), underpinning the positive momentum for U.S. growth deals in specialty industries. Focus abroad continued to be on IPOs in the Nordic Region with all IPOs commencing trading on the Stockholm Stock Exchange. Significant deal flow in Asia-Pacific included REITs Australian Unity Office Fund (AOF AU: +5.50%) and Frasers Logistics & Industrial Trust (FLT SP: +2.25%), with both firms recoding solid initial gains. Despite big weakness in global equities following Brexit, at least 10 notable IPOs are set to start trading during the last week of the calendar quarter. Most notable are the respective deals in the Japanese market (3543 JP, 6199 JP, 3542 JP), while two health care-related firms add to the list of IPOs set to take place in the U.S. (GEMP US, TCMD US).

IPOs (week of June 20): Ticker Return (%)
Alelion Energy Systems AB ALELIO SS 2.54
Australian Unity Office Fund AOF AU 5.50
AWS Holdings Inc 3937 JP 325.70
Cereno Scientific AB CRNOB SS -16.00
Comptoir Group plc COM LN 31.00
Dignita Systems AB DIGS SS -32.08
Frasers Logistics & Ind. Trust FLT SP 2.25
Lauritz.com Group A/S LAUR SS 0.67
Selecta Biosciences Inc SELB US 0.00
Shortcut Media AB SMG SS -6.36
 Strike Co Ltd  6196 JP  64.83
 Twilio Inc  TWLO US  75.33
 Videobur Sthlm Int AB  VIDS SS  -16.50
 Virtualex Consulting Inc  6193 JP  -4.22
IPOs (week of June 27): Ticker Sector
 China Digital Video Holdings  8280 HK  Consumer D.
 Gemphire Therapeutics Inc  GEMP US  Health Care
 Investis Holding SA  IREN SW  Financials
 KOMEDA Holdings Co Ltd  3543 JP  Consumer D.
 Li Bao Ge Group Ltd  8102 HK  Consumer D.
 MaxFast Properties AB  MAXF SS  Financials
 Seraku Co. Ltd.  6199 JP  Info. Technology
 Solasto Corp  6197 JP  Health Care
 Tactile Systems Technology  TCMD US  Health Care
 Vega Corp. Ltd  3542 JP  Consumer D.

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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