Key IPOX Indexes close week at record, IPOX U.S. Indexes on winning side of the corporate action trade. Ahead of the shortened U.S. trading week, the key IPOX Indexes closed at fresh historic highs as markets and the U.S. dollar rose, risk plunged (VIX: -10.20%) anew and the IPOX Indexes remained on the winning side of the corporate action trade with takeovers and activist investor interest fuelling select IPOX exposure. On the global level, e.g., the IPOX Global 50 (IPGL50) – diversified benchmark for the performance of the largest New Listings in the global regions using the IPOX Indexes Technology – added +1.19% to +22.61% YTD to end the week at yet another record, outpacing the global market for a third consecutive week. Within the IPOX Indexes Universe, the IPOX 100 U.S. (IPXO) continued to stand out, zooming into uncharted territory from mid-week to end unemployment Friday at a record, adding +2.09% to +13.99% YTD. While the IPOX Europe (IXTE) traded muted, we also note continued gains in the IPOX International (IPXI), which also finished the week at a record, adding +1.01% to +32.99% YTD.
IPOX portfolio holdings in focus. In the U.S., most focus was on IPOX 100 U.S. (IPXO) biotech holding USD billion 10.2 Kite Pharma (KITE US: +28.00) after its takeover by drug maker Gilead (GILD US: +13.50%) whose total market cap. rose by a massive USD billion 13.0 on the week. Other IPOX 100 U.S. (IPXO) winners included dating website operator Match Group (MTCH US: +18.13%), while strong earnings also pushed medical technology firm Catalent (CTLT US: +15.51%) to a fresh post-IPO high. Investors also continued to bid U.S. car maker take-over candidate Fiat Chrysler (FCAU US: +6.80%) on expectations of higher U.S. car sales as a result of the Houston rebuilding plans. Consumer staple IPOX heavyweight Kraft Heinz (KHC US: -2.12%) continued to sag, impacted by the plunge in soup maker Campbell Soup (CPB US: -11.67%) as weak earnings point to a structural shift in U.S. consumer behavior. In non-U.S. domiciled exposure included in the IPOX International (IPXI), e.g., expectations of continued strong growth propelled Chinese social media platform operator Weibo (WB US: +9.09%) to rank as the best weekly performer for a second week in a row, while hard-hit drug maker Shire (SHPG US: +5.01%) benefitted from indiscriminate buying of biotechs after the Gilead/Kite deal which also spilled over into big demand for recently issued China domiciled biotech IPOs and IPOX China (CNI, IPXUCHCP) portfolio holdings, including H.K.-listed biopharma 3SBIO (1530 HK: +12.60%) and U.S.-traded specialty pharma Beigene (BGNE US: +9.26%). We note profit taking in select global social media stocks, including H.K.-traded Meitu (1357 HK: -10.52%) and U.S. traded Snap (SNAP US: -3.45%) after the recent strength.
|IPOX Price Returns (%)||Last Week||Q2 2017||YTD 2017|
|Exposure: Global/International (xUS) (USD)|
|IPOX Global (IPGL50)||1.19||5.54||22.61|
|IPOX Global (IPGL30)||1.03||8.07||22.26|
|IPOX International (IPXI)*||1.01||9.24||32.99|
|Exposure: United States (USD)|
|IPOX Composite U.S. (IPXC)*||1.90||7.44||24.31|
|IPOX 100 U.S. (IPXO)*||2.09||3.86||13.99|
|IPOX 30 U.S. (IPXT)||1.72||4.62||15.43|
|Exposure: Europe/Nordic Region (EUR)|
|IPOX Europe (IXTE)||0.40||4.95||19.11|
|IPOX Nordic (IPND)||1.40||8.64||15.59|
|Exposure: Asia-Pacific/China Region (USD)|
|IPOX Asia-Pacific (IPTA)||0.59||2.99||16.96|
|IPOX China C. (IPXUCHCHP)*||0.61||10.06||36.41|
|IPOX China (CNI)||0.92||4.62||27.27|
* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [commodity trading symbol: IPOU7]).
IPOX-linked ETFs mirror gains in IPOX Indexes. The performance of IPOX-linked Exchange-Traded-Funds (ETFs) mirrored the strong gains in the underlying IPOX Indexes. For example, the USD million 872 IPOX 100 U.S. (IPXO)-linked First Trust US. Equity Opportunities ETF (FPX) added +2.13% to +14.66% YTD last week. Further, the younger USD million 21 IPOX International (IPXI)-linked First Trust International IPO ETF (FPXI) closed the week +34.85% YTD higher. The “FPX” ETF and “FPXI” ETF provide a diversified granular global solution to investing in the “going public” effect associated with the largest and typically best performing New Listings (IPOs and Spin-offs) domiciled in the U.S. and trading on a U.S. market (“FPX”) or domiciled outside the U.S. trading on an accessible global exchange (“FPXI”).
Global Deal-flow Review and Outlook: Quiet during shortened U.S. trading week, filing activity rises. No notable accessible global (non-China A shares) firms debuted last week. Ahead of the shortened U.S. trading week, no significant accessible IPOs are set to debut. U.S. filing activity, however, jumped, including Best Logistics, China Fintech Quant, video streaming player pioneer Roku, China luxury e-commerce retailer Secoo.com or Zai Lab, a Chinese drug developer working on cancer treatments.
|Select IPOs traded (week: August 29, 17)||Country|
|No notable accessible IPOs traded|
|IPOs set to debut (week: September 4, 17)||Country|
|No notable accessible IPOs scheduled|
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.
This article is provided for educational purposes only and is not considered to be a recommendation or endorsement of any trading strategy. The author is not affiliated with Lightspeed Trading and the content and perspective is solely attributed to the author.