The IPOX® Week, October 10, 2016

  • IPOX Indexes start new quarter with losses, underperform across the board.
  • Amid rise in yields, global high-yield and energy slumps.
  • Q4 IPO activity starts at brisk pace. U.S. IPOs in specialty industries lead gains, foreign/large deals lag.

IPOX Indexes start Q4 with losses, underperform across the board. The diversified IPOX Indexes started the new quarter with losses, with the IPOX Global 30 (IPGL30) – benchmark for the performance the largest and most liquid global IPOs and Spin-offs – shedding -0.94% to +3.39% YTD, -39 bps. more than when compared to the global benchmark. Relative weakness was pervasive and extended across the universe of IPOX Regional Indexes. In the U.S., e.g., the IPOX 100 U.S. – basis for a number of investment instruments including the USD million 572 First Trust U.S. IPO ETF (FPX) – declined -1.23% to +5.03%, in line with weak U.S. small-caps. Amid the tumultuous trading action in the British Pound (GBP: -4.16%) otherwise characteristic of Emerging Markets Currencies behavior towards the week-end, the IPOX Europe Indexes (IXTE: -1.37%, IPND: -2.38%) lagged the benchmarks by the most since the Brexit vote. Relative weakness also extended to the Asia-Pacific/China Region.

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50)* -1.20 8.91 -1.06
IPOX Global 30 (IPGL30) -0.94 9.85 3.39
IPOX Intern. (IPXI)* -0.70 11.01 0.45
Exposure: United States
IPOX Composite U.S. (IPXC)* -0.88 11.33 10.09
IPOX 100 U.S. (IPXO)* -1.23 7.16 5.03
IPOX 30 U.S. (IPXT) -1.19 8.41 5.97
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -1.37 12.02 -4.96
IPOX Nordic (IPND) -2.38 7.45 -0.38
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -0.87 5.28 3.38
IPOX China C. (IPXUCHCHP)* 1.06 16.94 6.21
IPOX China (CNI) 1.61 11.59 -3.25

* 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]).

Amid rise in yields, global high-yield and energy slumps. Global high-yield (e.g. REITs, utilities, energy) led the relative weakness, with focus on stocks including U.S.-based casino property owner MGM Growth Properties (MGP US: -5.95%), Germany’s real estate developer and services provider Vonovia (VNA GY: -5.72%), Canada’s utility network Hydro One (H CN: -4.63%), Spain’s airport operator EUR billion 18 Aena (AENA SM: -4.15%) or Denmark’s windfarm operator Dong Energy (DENERG DC: -3.64%). Other notable decliners on the week included ever-volatile U.S. social networker Twitter (TWTR US: -13.88%), whose valuation fell back to 5 times 2017 forward/expected revenues after bidder interest seemingly faded. Ahead of the detailed IPO filing information for the U.S. unit of Brazil’s JBS Inc., stocks with notable upside included Hong-Kong traded IPOX holding USD billion 14 WH Group (288 HK: +5.77%) – the world’s largest pork producer – while Siemens Spin-off German lights manufacturer Osram Licht AG (OSR GY: +14.07%) surged on reports that Chinas Sanan Optoelectronics may make a bid for the company.

Q4 IPO activity starts at brisk pace. U.S. IPOs in specialty industries lead gains, foreign/large deals lag. At least 12 notable accessible IPOs commenced trading last week, with the average (median) equally-weighted company gaining +8.38% (+1.34%) based on the difference between the final offering price and Friday’s close. It was a tale of two worlds in last week’s initial IPO trading across global regions: While initial momentum for the mostly small-cap IPOs in the U.S. remained buoyed, reception to the deals in Europe and APAC/China was muted and disappointing with the week’s largest global deal, the heavily-backed IPO of EUR billion 22 RWE’s alternative energy firm Germany’s Innogy (IGY GR: -0.22) declining slightly from its final offering price on the week. With recent IPO heavyweight Financial China Postal Saving Bank (1658 HK: +0.21%) providing little momentum, weakness extended to the respective small-caps “going public” in Hong Kong (1526 HK, 2166 HK). Respective U.S. IPOs, however, soared with most deals finishing the week significantly above offer (ADSW US, WAAS US, COUP US). Amid market uncertainty and secondary offering activity in recent IPOs recording big gains (ACIA US, TWLO US), short-run U.S. IPO momentum clearly decelerated into the week-end.

Company Name Identifier Return (%)
 Advanced Disposal Services Inc  ADSW US  11.11
 AquaVenture Holdings Ltd  WAAS US  21.94
 Aritzia Inc  ATZ CN  9.38
 Camping World Holdings Inc  CWH US  2.27
 Coupa Software Inc  COUP US  64.94
 Everspin Technologies Inc  MRAM US  0.25
 Honma Golf Ltd  6858 HK  0.40
 Innogy SE  IGY GR  -0.22
 Rici Healthcare Holdings Ltd  1526 HK  -10.55
 Smart-Core Holdings Ltd  2166 HK  -1.64
Upcoming IPOs Identifier Sector
 Azure Power Global Ltd.  AZRE US  Energy
 Extraction Oil & Gas LLC  XOG US  Energy
 Mammoth Energy Services Inc.  TUSK US  Energy

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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