The IPOX® Week, October 24, 2016

  • IPOX U.S. Indexes best performing U.S. equity indexes group, surge vs. benchmarks during expiration.
  • Other IPOX Indexes rise as dollar strengthens.
  • IPOs generally record initial gains, substantial international deal flow lined up.

IPOX U.S. Indexes best performing U.S. equity indexes group, surge vs. benchmarks during expiration. The IPOX U.S. Indexes (IPXC, IPXO, IPXT) gained vs. the U.S. market benchmarks during options expiration last week, with the IPOX 100 U.S. (IPXO) – underlying for the 5-star USD million 571 First Trust U.S. IPO Fund (FPX) – surging +1.62 to +4.87 YTD, a massive +124 bps. ahead of the S&P 500 (SPX) and seemingly insulated from the rise in the U.S. Dollar pressuring the main U.S. benchmarks. Big gains in select exposure across the market cap. spectrum after earnings and positive analyst comments contributed to the good showing, including payment process USD billion 53 PayPal (PYPL US: +12.51%), specialty chemicals maker UDS billion 3 The Chemours Company (CC US: +12.46%) or USD billion 4.9 Match Group (MTCH US: +8.50%), operator of multiple dating websites and applications, including Tinder. Amid profit taking and ahead of key earnings, recently added exposure lagged, including communications equipment maker Acacia Communications (ACIA US: -7.85%) or industrial Spin-off Fortive (FTV US: -1.60%). In all, 69% of portfolio holdings in the IPOX 100 U.S. (IPXO) rose last week, with the average (median) firm gaining +1.38% (+0.80%), less then when compared to the applied market-cap weighted index.

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50)* 1.54 8.91 -1.20
IPOX Global 30 (IPGL30) 2.00 9.85 3.74
IPOX Intern. (IPXI)* 0.98 11.01 0.17
Exposure: United States
IPOX Composite U.S. (IPXC)* 1.40 11.33 9.21
IPOX 100 U.S. (IPXO)* 1.62 7.16 4.87
IPOX 30 U.S. (IPXT) 1.92 8.41 6.00
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 1.13 12.02 -3.06
IPOX Nordic (IPND) 1.01 7.45 -0.37
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) 0.64 5.28 3.00
IPOX China C. (IPXUCHCHP)* 1.41 16.94 5.02
IPOX China (CNI) 1.35 11.59 -3.79

* 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]).

Other IPOX Indexes rise as dollar strengthens. Absolute strength extended to the IPOX Indexes covering other regions, including IPOX Global (IPGL30, IPGL50), IPOX International (IPXI), IPOX Europe (IXTE, IPND) or IPOX Asia-Pacific (IPTA). Firms in focus remained previously highlighted EON Spin-off Uniper SE (UNO1 GR: +7.52%) and H.K.-traded WH Group (288 HK: +4.95%), the world’s largest pork producer. Sentiment for IPOs in Australia soured after 07/2015 IPO health care services provider Healthscope (HSO AU: -19.32%) plunged after announcing a drop in quarterly revenue growth, while weak earnings also pressured recent Philips Spin-off Philips Lighting (LIGHT NA: -12.22%) in Europe.

Priced IPOs (wk.: 10/17) Identifier Return (%)
Allied Sustainability 8320 HK 48.21
Altus Holdings Ltd/Hong Kong 8149 HK 1730.59
Biffa PLC BIFF LN -0.83
CHerish Holdings Ltd 2113 HK 8.57
China Industrial Securities 8407 HK 0.75
Chong Kin Group Holdings Ltd 1609 HK -7.14
CRISPR Therapeutics AG CRSP US -1.29
Forterra Inc FRTA US -5.56
iRhythm Technologies Inc IRTC US 51.71
Luceco PLC LUCE LN 13.85
 NEW Zealand King Salmon  NZK NZ  -2.68
Vincit Group Oyj VINCIT FH 64.52
Upcoming IPOs (wk.: 10/24) Identifier Sector
Acushnet Holdings Corp GOLF US Consumer D
Blackline Inc BL US Info Tech
China Resources Pharmaceutical 3320 HK Health Care
ConvaTec Ltd. CTEC LN Health Care
Kyushu Railway Company 9142 JP Industrials
Myovant Sciences Ltd MYOV US Health Care
Quantenna Communications Inc QTNA US Info Tech
Ra Pharmaceuticals Inc RARX US Health Care
Tobin Properties AB TOBIN SS Financials.
ZTO Express Cayman Inc ZTO US Industrials

IPOs generally record initial gains, substantial international deal flow lined up. At least 12 notable (mostly small-cap) accessible (non-China A shares and non-India domestic) IPOs commenced trading last week with the median equally-weighted IPO gaining +4.66% based on the difference between Friday’s close and the respective final offering price. After big declines in some recent IPO high-flyers and substantial secondary issuing activity, more muted sentiment for IPOs in the U.S. was reflected in P/E-backed Goldman Sachs-led Forterra (FTRA US) recording a significantly negative initial return, rare amongst U.S. IPOs. More deals are lined up across the global regions during the week of 10/24, including London-traded medical equipment maker Convatec (CTEC LN), U.S. traded Chinese express delivery firm ZTO Express (ZTO US), U.S. domiciled communications equipment maker Sequoia Capital-backed Quantenna (QTNA US) and applications software maker Goldman Sachs-led Blackline (BL 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.

Lime Brokerage LLC is not affiliated with these service providers. Data, information, and material (“content”) is provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer or recommend any of the services provided by any of the above service providers and any service used to execute any trading strategies are solely based on the independent analysis of the user.

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