92% of the IPOX Indexes significantly beat the market benchmarks during Q3 2016. Most of the diversified IPOX Indexes closed out the quarter with losses, but significantly outperformed the market benchmarks during Q3 2016. While heavy exposure to last year’s Japanese privatization IPOs put a drag on IPOX Asia-Pacific (IPTA) during the last quarter, the outperformance of the rest of the IPOX Indexes Universe, exposure to rest of the IPOX Strategies added significant alpha to investor’s portfolios: On the global level, e.g., the USD trillion 1.2 IPOX Global 30 (IPGL30) rose 9.85% to 4.37% YTD, while the IPOX International (IPXI) traded 11.01% to 1.16% YTD higher. Big absolute and relative gains also extended to the IPOX U.S. (IPXC, IPXO, IPXT) and IPOX Europe (IXTE, IPND) Universe which added between 7.16% (IPXO) and 12.02% (IXTE) during last quarter, significantly more than when compared the key market gauges. Big quarterly gains in key IPOX heavyweights such as e-commerce behemoth Alibaba Group (BABA US) also lifted the IPOX China Indexes (IPXUCHCP, CNI) beyond the benchmarks. As investors more fully realized the actual value of select holdings as they build a history of earnings and risk (beta), key returns drivers continued to be earnings strength as well as corporate action activity with most IPOX Portfolio holdings being acquisition targets, rather than acquiring firms.
|IPOX Returns (%) (P)||Week||Q3 16||YTD 16|
|Exposure: Global/International (xUS) (USD)|
|IPOX Global 50 (IPGL50)*||-0.82||8.91||0.14|
|IPOX Global 30 (IPGL30)||-1.41||9.85||4.37|
|IPOX Intern. (IPXI)*||-1.34||11.01||1.16|
|Exposure: United States|
|IPOX Composite U.S. (IPXC)*||-0.31||11.33||11.07|
|IPOX 100 U.S. (IPXO)*||-0.14||7.16||6.33|
|IPOX 30 U.S. (IPXT)||-0.16||8.41||7.25|
|Exposure: Europe/Nordic Region|
|IPOX Europe (IXTE)||-0.02||12.02||-3.64|
|IPOX Nordic (IPND)||0.14||7.45||2.04|
|Exposure: Asia-Pacific/China Region|
|IPOX Asia-Pacific (IPTA)||-1.89||5.28||4.28|
|IPOX China C. (IPXUCHCHP)*||-1.55||16.94||5.10|
|IPOX China (CNI)||-2.23||11.59||-4.79|
* 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]). Green/Red indicates significant quarterly out/under-performance
IPOX-linked investment products top markets in Q3: Linked to the IPOX 100 U.S. Index (IPXO), the diversified, semi-passive, 5-star, 10-year-old, USD million 578 First Trust IPOX 100 U.S. ETF (FPX) gained to 7.63% to 6.84% YTD last quarter, while the First Trust IPOX International ETF (FPXI) rose 12.21% to 2.79% YTD, both substantially surpassing the performance of the ETFs linked to the respective benchmarks. Amongst active IPOX-linked funds, the Catalyst IPOx Allocation Fund (OIPAX) rose +14.34% to +15.70% YTD. The mutual fund adds an active overlay focusing on immediate deal flow opportunities in U.S.-traded IPOs and Spin-offs to a core position in the IPOX 100 U.S. (IPXO) and has been available to investors in the U.S. starting 10/1/2015.
|Company Name||Identifier||Return (%)|
|Fulgent Genetics Inc||FLGT US||2.44|
|Internationella Engelska||ENG SS||34.62|
|MedEquities Realty Trust||MRT US||-2.08|
|Nutanix Inc||NTNX US||131.25|
|Postal Savings Bank of China||1658 HK||0.21|
|Shineco Inc||TYHT US||148.67|
|Shun Wo Group Holdings||1591 HK||4.62|
|Tabula Rasa HealthCare||TRHC US||19.33|
|Takeaway.com Holding BV||TKWY NA||6.50|
|va-Q-tec AG||VQT GR||17.95|
U.S. IPOs continue to attract big following towards end of Q3. Q4 IPO activity set to start at brisk pace. At least 10 notable accessible IPOs commenced trading last week, with the average (median) equally-weighted company gaining 36.35% (12.23) based on the difference between the final offering price and the week’s close. While the week’s largest deal – the IPO of Financial Postal Savings Bank of China (1658 HK)- traded unsurprisingly lackluster based on final offer, most upside focus was on high-growth deals in specialty industries linked to Information Technology/U.S consumer and Health Care, such as USD billion 5 Goldman Sachs-led Nutanix (NTNX US), a designer and developer of enterprise cloud platforms. Reflective of indiscriminate risk-appetite for respective deals and the impact of heavy media coverage ensuing from big underpricing, the IPO priced above the initial range and closed the U.S. trading day a massive 39.52% higher from its initial and freely accessible traded opening. Ahead of some key deals, including the IPO of EUR billion 22 RWE’s alternative energy firm Innogy (IGY GR), European IPO sentiment strengthened with all (mostly small-cap) deals (ENG SS, TKWY NA, VQT GR), finishing the week above their final offering price, respectively.
Some notable Week-of-Oct. 3 deal flow is highlighted here:
|Company (Country)||Identifier||First Trading Day||Sector|
|Advanced Disposal Services Inc. (U.S.)||ADSW US||Thursday, 10/06/16||Industrials|
|Leading U.S. domiciled integrated provider of non-hazardous solid waste collection, transfer, recycling and disposal services operating primarily in secondary markets or under exclusive arrangements with municipalities. Founded in 2000, the FL-based firms seeks to sell ca. 23% of the firm, raising ca. USD million 404 in the process, with a total market cap. of ca. USD billion 1.76 at the top of the range. Proceeds earmarked to reduce debt with no expectation to pay dividends. Flat Y/Y average revenue growth “going public” at ca. 1.25 times 15’ revenues, discounted vs. stock market-traded incumbents in similar industries. Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC and Barclays Capital Inc. will act as lead joint book-running managers. UBS Securities LLC is also acting as a lead joint book-running manager.|
|AcquaVenture Holdings LLC (U.S.)||WAAS US||Thursday, 10/06/16||Industrials|
|Incorporated under British Virgin Island law in 2016 and operating out of FL, firm is a multinational provider of Water-as-a-Service, or WAAS, solutions that provide our customers with a reliable and cost-effective source of clean drinking and process water primarily under long-term contracts that minimize capital investment by the customer. Firms seeks to sell ca. 26% of total equity, raising ca. USD million 124 in the process, with a total market cap. of ca. USD billion 482. Proceeds are earmarked to fund a scheduled acquisition and for working capital purposes with no expectation to pay dividends. 96% Y/Y 2-year revenue growth “going public” at ca. 4.5 times 15’ revenues. Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets, LLC will act as lead joint book-running managers.|
|Coupa Software Inc. (U.S.)||COUP US||Thursday, 10/06/16||Information Technology|
|CA-based, U.S. domiciled firm founded in 2006 is a leading provider of a unified, cloud-based spend management platform that connects more than 460 organizations with more than 2 million suppliers globally. The firm’s platform provides greater visibility into and control over how companies spend money. Firm seeks to sell ca. 15% of total equity, raising ca. USD million 107 in the process, with a total market cap. of ca. USD million 758. Proceeds are earmarked to increase financial flexibility and visibility in the marketplace with no expectation to pay dividends. 65% Y/Y revenue growth “going public” valued at ca. 9 times 15’ revenues. Morgan Stanley & Co. LLC., JP Morgan Securities LLC and Barclays Capital Inc. will act as lead joint book-running managers.|
|Obalon Therapeutics Inc. (U.S.)||OBLN US||Thursday, 10/06/16||Health Care|
|CA-based, U.S. domiciled commercial-stage medical device company focused on developing and commercializing innovative medical devices to treat obese and overweight people by facilitating weight loss. The firm’s initial product offering is the Obalon balloon system, the first swallowable, gas-filled intragastric balloon designed to provide progressive and sustained weight loss in obese patients. Company seeks to sell ca. 31.3% of total equity (with insiders committing to buying ca. USD million 20 worth of shares in the IPO), raising ca. USD million 80 in the process, with a total market cap. of ca. USD million 260. Proceeds are earmarked for marketing expenditures with no expectation to pay dividends. 14% Y/Y revenue growth “going public” valued at ca. 65 times (!!!) 15’ revenues. UBS Securities LLC., Canaccord Genuity Inc. and Stifel, Nicolaus & Company, Incorporated will act as lead joint book-running managers.|
|Camping World Holdings, Inc. (U.S.)||CWH US||Friday, 10/07/16||Consumer Discretionary|
|Operational since 1966, IL-based, U.S domiciled firm is a provider of a comprehensive portfolio of services, protection plans, products and resources for recreational vehicle (“RV”) enthusiasts. Approximately 9 million households in the U.S. own an RV, and of that installed base, the firm has approximately 3.3 million Active Customers. P/E backed company seeks to sell ca. 15% of total equity, raising ca. USD million 260 in the process at the high-end, with a total market cap. of ca. USD billion 2. Proceeds are earmarked to reduce debt and for general corporate purposes with shares yielding ca. 1.1% initially. 18.6% Y/Y average 2-year revenue growth valued at ca. 0.6 times 15’ revenues. Goldman, Sachs & Co. and JP Morgan Securities LLC will act as lead joint book-running managers.|
|Everspin Technologies, Inc. (U.S.)||MRAM US||Friday, 10/07/16||Information Technology|
|U.S. domiciled founded in 2008, AZ-based firm is the leading provider of magnetoresistive random access memory (MRAM) solutions. Concurrent with a private placement, firms seeks to sell ca. 39% of total equity, raising ca. USD million 54 in the process, with a total market cap. of ca. USD million 138. Proceeds are earmarked for general corporate purposes with no expectation to pay a dividend. 6.6% Y/Y revenues growth “going public” valued at ca. 5 times 15’ revenues. Stifel, Nicolaus & Company, Incorporated and Needham & Company will act as lead joint book-running managers.|
|Innogy AG (Germany)||IGY GR||Friday, 10/07/16||Energy|
|Unit of RWE AG, Germany’s largest power producer. IPO comes two weeks after the RWE’s Spin-off of subsidiary EUR billion 4 Uniper AG (UN01 GR: +5.17% since Spin-off). RWE’s seeks to sell ca. 15% of total equity in Innogy AG raising ca. EUR 3.64 in the process, with a total market cap. of ca. EUR billion 22. Fund manager Blackrock acted as cornerstone investor for ca. EUR million 940 (up to 25% of the offering) of the “value” deal. Lead joint book-running managers include all major investment banks.|
|Rici Healthcare Holdings, Inc. (H.K,)||1526 HK||Thursday, 10/06/16||Health Care|
|Founded in 2002, firm is the third largest private provider of medical examination services in the Yangtze River Delta region, and the fourth largest in China, by revenue by 2014. The Mainland China-based hospital operator has experienced a an average 28% Y/Y revenue growth over the past years and operator and raised ca. USD million 131- representing ca. 25% of total equity of the firm – to launch a pediatrics hospital, establish six new medical examination facilities, one multi-function facility and expand its existing Nantong Rich Hospital. Firm priced the deal at HKD 2.56, the low end of the HKD 2.56-2.82 range. The firm had previously pulled its IPO citing “unfavorable market conditions”. BNP Paribas and Credit Suisse are the joint sponsors.|
|Honma Golf Ltd. (Hong Kong)||6858 HK||Thursday, 10/06/16||Consumer Discretionary|
|The company is a Chinese-owned, Japanese based maker of high-end golfing equipment such as clubs plated with gold and plans to raise up to USD million 168 for 19.80% of total equity to pursue potential strategic acquisitions of businesses and further expand into North America and Europe. Morgan Stanley and Nomura will act as joint sponsors and lead managers for the deal.|
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 nor information provided by any of the above service providers and any service or information used to execute any trading strategies are solely based on the independent analysis of the user.