The IPOX® Week, October 17, 2016

  • IPOX Indexes trade mixed ahead of U.S. options expiration. IPOX Europe (IXTE) rallies.
  • Weak Alcoa earnings triggers fall in high-beta stocks.
  • Amid rise in volatility, initial IPO returns decline. Plenty of global deals lined up.

IPOX Indexes trade mixed ahead of U.S. options expiration, IPOX Europe (IXTE) rallies. Most IPOX Indexes fell for a second week, with the IPOX Global 30 (IPGL30) – benchmark for the performance the largest and most liquid global IPOs and Spin-offs – shedding -1.62% to +1.71% YTD, -44 bps. more than when compared to the global benchmark. The IPOX Regional Indexes traded mixed: While the IPOX 100 U.S. (IPXO) – basis for investment instruments including the USD million 562 First Trust U.S. IPO ETF (FPX) – declined -1.71% to +3.20% YTD, the IPOX Europe Indexes (IXTE: +0.86%, IPND: -0.63%) traded significantly higher vs. the market. Relative strength also extended to the Asia-Pacific/China Region (IPTA, IPXUCHCP).

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50)* -1.67 8.91 -2.71
IPOX Global 30 (IPGL30) -1.62 9.85 1.71
IPOX Intern. (IPXI)* -1.25 11.01 -0.80
Exposure: United States
IPOX Composite U.S. (IPXC)* -2.17 11.33 7.70
IPOX 100 U.S. (IPXO)* -1.74 7.16 3.20
IPOX 30 U.S. (IPXT) -1.86 8.41 4.00
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 0.86 12.02 -4.14
IPOX Nordic (IPND) -0.25 7.45 -0.63
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -1.00 5.28 2.35
IPOX China C. (IPXUCHCHP)* -2.50 16.94 3.56
IPOX China (CNI) -1.88 11.59 -5.07

* 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]).

Weak Alcoa earnings triggers fall in high-beta stocks. With U.S. base metal proder Alcoa (AA US: -15.72%) kicking off the U.S. earnings season on a sour note, high-beta stocks were hit ahaed of earnings, including consumer products maker Fitbit (FIT US: -6.70%), e-commerce firm Wayfair (W US: -6.74%) or applications software maker Box (BOX US: -7.18%). While fading buy-out interest in U.S. social media firm Twitter (TWTR US: -14.96%) caused another week of big losses for the firm, Chinese social media firm Weibo (WB US: +2.27%) – valued at 11 times 2017’ revenues and growing by more than double when compared to Twitter (TWTR) – reached a fresh weekly post-IPO closing high. Notable upside in recent German Spin-offs RWE’s Uniper AG (UN01 DE: +5.78%) and Bayer’s Covestro (1COV DE: +5.11%) helped to push the IPOX Europe (IXTE) well beyond the market benchmarks last week. Amid the continued outperformance of the IPOX Nordic (IPND), weak earnings sank IPOX Holding Swedish communications equipment maker Eltel SS (ELTEL SS: -43.02%).

Company Name Identifier Return (%)
Abeo SA ABEO FP 13.66
Azure Power Global Ltd AZRE US -23.61
AzurRx BioPharma Inc AZRX US -4.36
Bancorp 34 Inc BCTF US 22.50
Extraction Oil & Gas Inc XOG US 14.63
IBI Group Holdings Ltd 1547 HK -3.33
Kwong Man Kee Group Ltd 8023 HK 11.63
Mammoth Energy Services Inc TUSK US -11.60
Ottawa Bancorp Inc OTTW US 15.00
Shop Apotheke Europe NV SAE GR 3.93
Upcoming IPOs (wk: 10/17) Identifier Sector
Allied Sustainability 8320 HK Industrials
Altus Holdings Ltd/Hong Kong 8149 HK Financials
Antipodes Global Investment APL AU Financials
Biffa Group Holdings UK Ltd BIFF LN Industrials
Charter Hall Long Wale REIT CLW AU REIT
CHerish Holdings Ltd 2113 HK Financials
China Industrial Securities 8407 HK Financials
Chong Kin Group Holdings Ltd 1609 HK Industrials
CRISPR Therapeutics AG CRSP US Health Care
Forterra Inc FRTA US Materials
iRhythm Technologies Inc IRTC US Health Care
NEW Zealand King Salmon NZK NZ Consumer D

Amid rise in volatility, initial IPO returns decline. Plenty of global deals lined up. At least 10 notable accessible (non China A-shares) IPOs commenced trading last week, with the average (median) equally-weighted company gaining +3.84% (+7.78%) based on the difference between the final offering price and Friday’s close. The solid debut of the week’s largest deal, Goldman Sachs-led U.S. energy explorer Extraction Oil & Gas (XOG US: +14.63%), underlined the solid momentum behind U.S. domiciled deals. A number of high profile IPOs are set to commence trading during the upcoming week, including lowered media-heavy U.K. waste management firm Biffa Group (BIFF LN), Australian REIT Charter Hall Long Wale (CLW AU) and Hong Kong Financial China Industrial Securities (8407 HK). Notable IPOs set to start trading in the U.S. include drainage/water pipes maker P/E-backed infrastructure play Forterra (FRTA US), medical devices maker iRythm Technologies (IRTC US) or gene editing firm Switzerland-based CRISPR Therapeutics (CRSP US).

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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