The IPOX® Week, October 31, 2016

  • IPOX U.S. Indexes (IPXC, IPXO, IPXT) slide with U.S. small-caps as earnings, health care weigh.
  • IPOX Europe (IXTE, IPND) extend relative YTD gains.
  • Amid de-celeration in U.S. IPO momentum, more deals line up in the global regions.

IPOX U.S. Indexes (IPXC, IPXO, IPXT) slide with U.S. small-caps as earnings, health care weigh. The IPOX U.S. Indexes (IPXC, IPXO, IPXT) followed U.S. small-caps lower last week, with the IPOX 100 U.S. (IPXO) – underlying for the 5-star USD million 566 First Trust U.S. IPO Fund (FPX) – sliding -2.32% to +2.43% YTD. Big weakness in select health care related exposure after earnings and adverse news weighed on index performance, with stocks including drug makers Abbvie (ABBV US: -5.54%) and Shire (SHPG US: -5.86%) or contract researchers Pra Health (PRA US: -9.19%) and Inc Research (INCR US: -12.55%) substantially pressuring the index. Car producer Fiat Chrysler (FCAU US: +14.13%) and recent Spin-offs Industrial Fortive (FTV US: +3.16%) and specialty chemicals maker The Chemours Company (CC US: +4.29) rose against the trend. In all, just 28% of portfolio holdings in the IPOX 100 U.S. (IPXO) rose last week, with the average (median) equally-weighted firm shedding -2.27% (-1.76%), less than 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) -1.11 8.91 -2.30
IPOX Global 30 (IPGL30) -1.41 9.85 2.28
IPOX Intern. (IPXI)* -0.80 11.01 -0.63
Exposure: United States
IPOX Composite U.S. (IPXC)* -2.83 11.33 6.12
IPOX 100 U.S. (IPXO)* -2.32 7.16 2.43
IPOX 30 U.S. (IPXT) -1.92 8.41 3.97
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -0.02 12.02 -3.08
IPOX Nordic (IPND) -2.58 7.45 -1.96
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -1.27 5.28 1.69
IPOX China C. (IPXUCHCHP)* -1.56 16.94 3.38
IPOX China (CNI) -1.50 11.59 -5.23

* 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, IPND) extend relative YTD gains. We note the continued relative strength of the IPOX Europe Indexes (IXTE, IPND) last week with strong gains in heavyweight Financials Dutch-domiciled ABN Amro Group (ABN NA: +5.93%) and ASR Nederland (ASRNL NA: +5.42%) helping the index to extend its relative YTD performance gain vs. the European market benchmarks by +106 bps. to +549 bps. Amid more declines in Danish drug maker Novo Nordisk (NOVOB DC: -16.26% to a massive -40.61% YTD) pressuring the main benchmarks, the IPOX Nordic (IPDN) extended its YTD performance lead vs. the Nordic market by +54 bps. to +861 bps.

Priced IPOs (wk.: 10/24) Identifier Return (%)
 Acushnet Holdings Corp  GOLF US  5.59
 Alliar Medicos A Frente SA  AALR3 BZ  -4.00
 BCM Alliance Bhd  BCM MK  10.53
 Blackline Inc  BL US  39.41
 China Resources Pharmaceutical  3320 HK  -1.10
 ConvaTec Group PLC  CTEC LN  6.67
 Kyushu Railway Co  9142 JP  18.27
 Myovant Sciences Ltd  MYOV US  -13.33
 Quantenna Communications Inc  QTNA US  -3.13
 Ra Pharmaceuticals Inc  RARX US  -0.85
 Tobin Properties AB  TOBIN SS  13.13
 Van Elle Holdings PLC  VANL LN  0.50
 ZTO Express Cayman Inc  ZTO US  -12.87
Upcoming IPOs (wk.: 10/31) Identifier Sector
 Baroque Japan Ltd  3548 JP  ConsumerD.
 COFCO Meat Holdings Ltd  1610 HK  ConsumerS.
 GDS Holdings Ltd  GDS US  TelecomS.
 JNBY Design Ltd  3306 HK  ConsumerD.
 Pilipinas Shell Petroleum Corp  SHLPH PM  Energy
 Smart Sand Inc  SND US  Materials

Amid de-celeration in U.S. IPO momentum, more deals line up in the global regions. At least 13 notable accessible (non-China A shares and non-India domestic) IPOs commenced trading last week with the median equally-weighted IPO gaining just +4.53% (+0.50%) based on the difference between Friday’s close and the respective final offering price. The big historical divergence in initial IPO trading sentiment for U.S. vs. non-U.S. domiciled IPOs traded in the U.S. again became clear last week: While China-domiciled, NYSE-traded courier service ZTO Express (ZTO US: -12.87%) left initial IPO investors with big losses, big gains in U.S. domiciled applications software maker BlackLine (BL US: +39.41%) underlined continued strong demand of U.S. domiciled deals in specialty industries. In markets outside the U.S., the solid debut of health care firm GBP billion 4.7, London-traded Convatec (CTEC LN: +6.67%) and JPY billion 488.8 highyielder privatization JR Kyushu Railway (9142 JP: +18.27%) underlined solid demand for well-priced value/growth deals abroad. More IPOs are set to commence trading during the upcoming week, including Goldman-Sachs led industrial sand supplier TX-based Smart Sand (SND US) and KKR-backed COFCO Meat (1610 HK) which priced its H.K. IPO at the low end of the marketed range.

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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