Style-Box agnostic IPOX Indexes start new quarter with strong gains. The style-box agnostic IPOX Indexes remained buoyed last week, continuing to record strong gains across the Indexes group. Most upside focus was on China-linked exposure (IPXUCHCP, CNI), which also drove outsized gains in the IPOX Global (IPGL50) and the IPOX International (IPXI). In the U.S., the IPOX 100 U.S. (IPXO) – benchmark for the performance of the largest New Listings (IPOs and Spin-offs) in the U.S. by applying the IPOX Indexes Technology – closed out the week at the highest level on record, adding 1.45% to 19.71% YTD, now 584 bps. YTD ahead of the S&P 500 (SPX), main gauge for U.S. stocks.
Broad-based gains across sectors: Gains were broad-based and extended across sectors with notable upside in U.S.-traded small- and mid-caps including software maker Coupa Software (COUP US: 9.79%), social networker Match Group (MTCH US: 9.44%) or specialty chemicals maker The Chemeurs Company (CC US: 8.02%), while IPOX heavyweights IL-based drug maker Abbvie (ABBV US: 1.83%) and consumer staple Kraft Heinz (KHC US: 0.81%) had a solid showing on the week. Recently highlighted short-selling targets including online household goods retailer Wayfair (W US: 2.36%) and Canadabased e-commerce platform operator Shopify (SHOP US: – 15.94%) traded mixed at best. Amid favorable analyst coverage, we note a new high in European low-cost carrier 02/2015 IPO Wizz Air (WIZZ LN: 10.28%).
IPOX-linked ETFs mirror rise in underlying Indexes. Linked to the IPOX 100 U.S. (IPXO), the 5-star USD million 878 First Trust U.S. Equity Opportunities ETF (FPX) added 1.43% to 20.35% YTD, while the First Trust International IPO ETF (FPXI) added 1.53% to 37.66% YTD. FPX and FPXI offer a granular and style-box agnostic approach to investing in the largest global New Listings (IPOs and Spin-offs), often a pure proxy for economic growth and innovation.
Global Deal-flow Review and Outlook: IPO sentiment strong, more deals expected. Healthcare dominates. At least 7 notable (non-China A shares) firms commenced trading last week with the average (median) IPO adding 24.03% (22.59%) based on the difference between the final offering price and Friday’s close. Upside continued to be strong for growth-oriented deals linked to specialty industries with strong initial gains recorded by USD billion 5.1 data center operator Las Vegas-based Switch (SWCH US: 22.59%) or drug maker Rhythm Pharma (RYTM US: 48.53%). Larger deals abroad traded mostly flat, including Indian Financial SBI Life Insurance (SBILIFE IN: -0.46%) and ChemChina-linked Italian tire maker Pirelli (PIRC IM: 3.08%).
|IPOX Price Returns (%)||Last Week||Q3 2017||YTD 2017|
|Exposure: Global/International (xUS) (USD)|
|IPOX Global (IPGL50)||1.55||8.63||26.13|
|IPOX Global (IPGL30)||1.65||7.27||26.50|
|IPOX International (IPXI)*||1.55||9.49||35.42|
|Exposure: United States (USD)|
|IPOX Composite U.S. (IPXC)*||2.02||8.86||30.37|
|IPOX 100 U.S. (IPXO)*||1.45||7.06||19.71|
|IPOX 30 U.S. (IPXT)||1.33||7.99||21.23|
|Exposure: Europe/Nordic Region (EUR)|
|IPOX Europe (IXTE)||0.84||5.59||21.84|
|IPOX Nordic (IPND)||0.99||5.17||19.83|
|Exposure: Asia-Pacific/China Region (USD)|
|IPOX Asia-Pacific (IPTA)||0.71||2.85||15.57|
|IPOX China C. (IPXUCHCHP)*||3.34||12.29||42.32|
|IPOX China (CNI)||4.16||9.59||33.19|
* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [Commodity trading symbol: IPOZ7]).
Amid the big YTD relative and absolute gains in the IPOX Nordic (IPND), mostly health care focused firms “going public” in the Nordic region take center-stage this week including Stockholm-based biopharma BioArctic (BIOA SS), Sweden-based medical equipment maker Handicare Group (HANDI SS), Helsinki-based health care facilities operator Terveystalo (TTALO FH) and Oslo-based IT services provider Webstep (WSTEP NO). Deals in the U.S. include ear, nose or throat surgery center operator Optinose (OPTN US), children implant maker OrthoPediatrics (KIDS US) or Goldman Sachs-led Cargurus (CARG US), a retailer of automobiles and related accessories.
|Select IPOs traded (week: October 02, 2017)||Country|
|Balco Group AB||Sweden|
|Gima TT SpA||Italy|
|PDL Community Bancorp||U.S.A.|
|Pirelli & C SpA||Italy|
|Rhythm Pharmaceuticals Inc||U.S.A.|
|SBI Life Insurance Co Ltd||India|
|IPOs set to debut (week: October 09, 2017)||Country|
|Alpha Financial Markets Consulting Ltd||Britain|
|Handicare Group AB||Sweden|
|Henan Jinma Energy Co Ltd||China|
|MCP Master Income Trust||Australia|
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.