The IPOX® Week, November 6, 2016

  • IPOX U.S. Indexes slide into U.S. presidential election week, mixed earnings weigh.
  • IPOX Europe falls, extends relative YTD gains.
  • IPO momentum slows, more deals line up.

IPOX U.S. Indexes slide into U.S. presidential election week, mixed earnings weigh. The range of IPOX U.S. Indexes (IPXC, IPXO, IPXT) extended the decline from the previous week, with the IPOX 100 U.S. Index (IPXO) – underlying for the 5-star USD million 555 First Trust U.S. IPO Fund (FPX) – sliding by -2.83% to -0.46% YTD, within the range of losses recorded by other U.S. equity benchmarks. Continued weakness across the European markets, lackluster earnings and increasing uncertainty over the outcome of the U.S. presidential election weighed on stock sentiment across the market-cap spectrum with U.S. social networker Facebook (FB US: -8.03%), travel technology services provider Sabre (SABR US: -9.70%) or consumer health devices maker Fitbit (FIT US: -35.43%) in in focus. Payment processor Square (SQ US +9.34%), specialty chemicals maker spin-off Ingevity (NGVT US: +9.63%) or real estate website operator Zillow (Z US: +6.26%) rose against the trend. In all, 78% of constituents in the IPOX 100 U.S. (IPXO) fell, with the average (median) equally weighted stock declining by -2.67% (-2.45%).

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -2.07 8.91 -4.33
IPOX Global 30 (IPGL30) -2.60 9.85 -0.38
IPOX Intern. (IPXI)* -1.87 11.01 -2.49
Exposure: United States
IPOX Composite U.S. (IPXC)* -3.34 11.33 2.57
IPOX 100 U.S. (IPXO)* -2.83 7.16 -0.46
IPOX 30 U.S. (IPXT) -2.39 8.41 1.48
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -3.04 12.02 -6.03
IPOX Nordic (IPND) -4.46 7.45 -6.58
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -0.35 5.28 1.33
IPOX China C. (IPXUCHCHP)* -2.19 16.94 1.12
IPOX China (CNI) -2.00 11.59 -7.12

* 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 [IPOZ6]).

IPOX Europe Indexes (IXTE) extend relative YTD gains. We continue to note relative strength in the IPOX Europe (IXTE), which extended its relative performance jump vs. the European market to +591 bps. last week. Strength in recently issued German domiciled Spin-offs helped, with focus on EON Spin-off energy firm Uniper (UN01 GY: +4.25%) and Bayer Spin-off chemicals maker take-over target Covestro (1COV GY: +3.13%), which closed the week at a fresh post-listing high. Firm Hong-Kong domiciled exposure also helped the IPOX Asia-Pacific (IPTA) to a week of relative gains.

Priced IPOs (wk.: 10/31) Identifier Return (%)
Apollo Tourism & Leisure Ltd ATL AU 32.50
Baroque Japan Ltd 3548 JP -17.50
COFCO Meat Holdings Ltd 1610 HK -20.50
GDS Holdings Ltd GDS US 0.00
JNBY Design Ltd 3306 HK 7.34
NFD SA de CV FPLUS16 MM 0.00
Pilipinas Shell Petroleum Corp SHLPH PM 3.73
Smart Sand Inc SND US -0.09
Thailand Prime Property REIT TPRIME TB 37.00
Upcoming IPOs (wk.: 11/05) Identifier Sector
 Charter Hall Long Wale REIT  CLW AU  Financials
 China Art Financial Holdings Ltd  1572 HK  Financials
 Clifford Modern Living Holdings  3686 HK  Consumer D
 Doosan Bobcat Inc  241560 KS  Industrials
 Elanor Retail Property Fund  ERF AU  Financials
 Gemilang International Ltd  6163 HK  Consumer D
 Inghams Group Ltd  ING AU  Consumer S
 Luk Hing Entertainment Group  8052 HK E  Consumer D
 Motif Bio PLC  MTFB US  Health Care
 PetroShare Corp  PRHR US  Energy
 Senestech Inc  SNES US  Health Care
Sheung Yue Group Holdings Ltd  1633 HK  Industrials
 WW Holding Inc  8442 TT  Consumer D
 Zhou Hei Ya International  1458 HK  Consumer S

IPO momentum slows, more deals line up. At least 9 notable accessible (non-China A shares and non-India domestic) IPOs commenced trading last week, with the median equally-weighted IPO gaining just +4.72% (+0.00%) based on the difference between Friday’s close and the respective final offering price, similar to the showing during the previous week and underlying slowing initial IPO momentum. U.S.-traded deals (GDS US and SND US) traded mostly flat, while Hong-Kong most significant deal (1610 HK) declined substantially based on offer. Amid the absence of significant deals in the U.S., notable deals during the upcoming week include Korea-listed manufacturing and robotics maker Doosan Bobcat (241560 KS), Taiwan-traded consumer textile products manufacturer WW Holding (8442 TT) and Australia-traded poultry products producer P/E-backed Inghams Group (ING AU) which lowered its offer price into the IPO. The IPO is launched amid the big relative strength in Hong Kong-traded 08/2014 IPO HKD billion 91 WH Group (288 HK: +43.19% YTD). Two weeks ago, the world’s largest meat producer and processor- whose shares almost halved during its first year of listing in Hong Kong – fell after a key shareholder raised ca. USD million 800 in a secondary share sale.

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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