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The IPOX® Week, March 06, 2017

  • IPOX 100 U.S. Index (IPXO) first equity benchmark to track Snap (SNAP US), provides exposure to key Berkshire Hathaway (BRK/B) holdings.
  • IPOX China Indexes (CNI, IPXUCHCP) record big relative performance jump.
  • After strong week for global IPOs, more deals lined up.

IPOX 100 U.S. Index (IPXO) first major equity benchmark to track Snap (SNAP US), provides exposure to key Berkshire Holdings (BRK/B). The IPOX 100 U.S. (IPXO) extended its YTD gain by +0.40% to +6.25% last week, significantly outperforming weak U.S. small caps. Amid earnings, the divergence in returns of index holdings was significant with gains in specialty chemicals maker Ingevity (NGVT US: +11.24%), the impact of Friday’s rise in newly added social networker Snap Inc. (SNAP US: +10.66% [based on Thursday’s close]) or roaring apparel store operator Burlington Stores (BURL US: +9.68%) more than offsetting big declines in recent IPOs including computer hardware firm Nutanix (NTNX US: -22.87%) and health care services providers Medpace (MEDP US: -20.08%) and INC Research (INCR US: -17.17%). Other core holdings – overlapping with Warren Buffet’s Berkshire Hathaway (BRK/B: +3.21%) – fell, including consumer staples Kraft Heinz (KHC US: -1.70%) and Restaurant Brands (QSR US: -1.39%). In all, 53% of members in the IPOX 100 U.S. Index (IPXO) rose, with the average (median) equally weighted stock declining (rising) by -0.04% (+0.19%), less than when compared to the applied market-cap weighted IPOX 100 U.S. Index (IPXO).

IPOX Returns (%) (P) Week 2017 2016
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) 0.16 6.44 -2.50
IPOX Global 30 (IPGL30) 0.00 6.24 1.73
IPOX Intern. (IPXI)* -0.03 7.43 -4.63
Exposure: United States
IPOX Composite U.S. (IPXC)* 0.50 8.48 7.24
IPOX 100 U.S. (IPXO)* 0.40 6.25 5.89
IPOX 30 U.S. (IPXT) 0.54 6.36 8.44
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 1.18 3.88 0.18
IPOX Nordic (IPND) 0.24 4.28 -1.59
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -0.06 6.36 -1.96
IPOX China C. (IPXUCHCHP)* -0.16 9.47 -3.73
IPOX China (CNI) -0.52 10.74 -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 [commodity trading symbol: IPOH7]).

IPOX-linked Financial Products mirror movements in underlying Indexes, impact of strength in SNAP (US): IPOX-linked investment products traded mixed on the week: While the USD million 683, 5-star First Trust U.S. Equity Opportunities ETF (FPX US, FPX LN) added +0.54% +6.41% YTD, its international counterpart (FPXI US) fell to +7.58% YTD. Early exposure to Snap (SNAP US) noticeably impacted the performance of the Catalyst IPOX Allocation Fund (OIPAX), with the actively managed mutual fund extending its YTD gain by +1.40% to +6.48% YTD, outpacing U.S. equities.

IPOX China Indexes (CNI, IPXUCHCP) record big relative performance jump. We note unusually big relative weakness in the China-linked broad benchmarks vs. the IPOX China Indexes (CNI, IPXUCHCHP) last week, with the IPOX China (CNI) (IPXUCHCP) extending the relative performance differential by a massive +211 bps. to +276 bps. YTD.

After strong week for global IPOs, more deals lined up. At least 14 significant global IPOs (excluding Chinese A-shares) commenced trading last week, with the average (median) equally-weighted deal gaining +29.39% (19.46%) based on the difference between the final offering price and week’s close. In the run-up to the IPO of Saudi-Arabia’s oil producer Aramco, 7 notable firms commenced trading on the local exchange, all producing significant initial returns, kicking-off strong momentum to rejuvenate the country’s equity culture and transformation. Amid the big reception to Snap (SNAP US) – enforced by the addition of cornerstone investor LA-based NBC Universal – two notable U.S. IPOs are set to go public this week: These include specialty apparel store operator MA-based Jill Intermediate (JILL US), as well as IT-services provider NY-based Presidio (PSDO US).

Traded IPOs (week of 02/27/2017) Country
Abdullah Saad Mohammed Abo Moati Saudi Arabia
Al Samaani Factory For Metal Industries Saudi Arabia
Al-Omran Industrial & Trading Saudi Arabia
Arab Sea Information Systems Saudi Arabia
Baazeem Trading Saudi Arabia
China Yuhua Education Corp Hong Kong
Development Works Food Saudi Arabia
Hamilton Lane United States
LXI REIT United Kingdom
Premier Food & Fishing South Africa
Raydan Saudi Arabia
Snap United States
Up Global Sourcing Holdings United Kingdom
Vietjet Aviation Vietnam
Upcoming IPOs (week of 03/06/2017) Country
Impact Healthcare REIT PLC United Kingdom
J. Jill Inc. United States
Microwave Group Ltd. Hong Kong
Persta Resources Inc. Hong Kong
Presidio Inc. United States

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.

This article is provided for educational purposes only and is not considered to be a recommendation or endorsement of any trading strategy. The author is not affiliated with Lightspeed Trading and the content and perspective is solely attributed to the author.

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