Last Week in Global IPOs: Rising Risk

|
Includes: FPX, GM, LNKD, RENN
by: Josef Schuster

Global equity benchmarks extended previous declines as weak U.S. macroeconomic data, falling interest rates and the US dollar, and lackluster Asia-Pacific caused equity risk to rise. While most IPOX Indexes recorded big relative performance gains, global IPOs debuted notably mixed.

IPO Initial Pricing Action:

Company
Ticker
Return over IPO (%)
GreaterChina Profi
8193 HK
25.00%
Royal Wolf Holdings Ltd
RWH AU
16.94%
SeAH Special Steel
019440 KS
37.50%
LTS Co Ltd
138690 KS
-15.15%
KT Skylife Co Ltd
053210 KS
18.24%
MGM China Holdings Ltd
2282 HK
1.83%
Zhengye International
3363 HK
0.70%
Click to enlarge
  • 17 accessible global IPOs launched last week with the average (median) IPO gaining 10.31% (+2.60%) from the final offering price on the week. Most initial upside was amongst select South Korean IPOs, with SeAH Special Steel Co (019440 KS: +37.50%) in focus. Amid weakness in the Macau-based casino operators, MGM China – last week’s most significant deal – rose just 1.83% on its debut. Having priced competitively, other Hong Kong IPOs strengthened their debuts.
  • Another nine IPOs debuted on the China A Shares market, with the average (medium) gaining just 0.79% (-2.82%), reflective of the recent deterioration in the benchmarks.
Upcoming IPOs: (Week: 06/06/2011):
Company
Ticker
Day
Lead
Fusion-io Inc
FIO US
6/8
CS, GS
Kurotani Corp
3168 JP
6/9
Nomura
Taomee Holdings
TAOM US
6/8
CS, DB
Dragon Crown Co
935 HK
6/10
China Everbright
Huaneng Renew
958 HK
6/10
CICCHK, GS,MQ
Click to enlarge
  • Amid rising risk underlined by the big declines in some of the recently issued global IPOs, we expect increased price sensitivity for all upcoming specialty/small-cap technology IPOs in the U.S., including Fusion-io Inc. (FIO US) and Taomee (TAOM). Having postponed the IPO in December 2010, the largest IPO of the week belongs to the H.K. listing of Huaneng Renewables (958 HK). Having lined up a number of high-profile cornerstone investors, the company priced the shares towards the lower end of the book building range.
IPOX Indexes Performance:
  • The IPOX Global Indexes finished the week well supported and substantially extended the relative gains versus the global equity benchmarks. The IPOX Global 100 Index (IPGL100), key proxy for the performance of the largest and most liquid global IPOs and spin-offs, rose 0.40% to +5.51% YTD.
  • 59/100 companies in IPGL100 fell, with the average (median) equally-weighted index member falling 0.83% (-0.80%), substantially underperforming the applied market-cap weighted IPGL100.
  • In IPOX Global Sectors, the IPOX Global Consumer Discretionary fell most, reflective of big profit taking in the well-performing Macau-based casino operators Wynn Macau (1128 HK: -8.99%), Sands China (1928 HK: -4.90%) and SJM (880 HK: -2.78%). IPOX Global Material was the best performing IPOX Global Sector, benefiting from a rise in Brazil’s Duratex (DTEX3 BS: +4.56%), Fosun International (656 HK: +2.21%) and Mongolian Mining (975 HK: +2.00%).
  • Most IPOX Regional Indexes outperformed their respective benchmarks: Upside focus was on the big surge in the IPOX Latin America 20 Index (IPXULATT: +4.32%). Continued strength in Gree Inc. (3236 JP: +4.91%), long-run key IPOX holding and cheapest long-only way to play global social networking, contributed to relative strength in the IPOX Asia-Pacific 30 Index (IPTA). With yet another quarter of earnings releases reducing the “divergence of opinion” about the respective stock amid weakness in the Russell 2000 (RUT: -2.74%), we note big declines in some of the best performing recent U.S. IPOs such as Vera Bradley (VRA: -21.94%), The Fresh Market (TFM: -17.84%) and RealD (RLD: -17.83%). The IPOX U.S. 100 Index (ETF: FPX: -2.00% to +7.74% YTD) traded in line with benchmarks and circumvented this big stock specific IPO risk. Further declines in BSBR-like General Motors (GM: -6.91%) on selling by long-only investors points to asset allocation shifts away from equities.
Key IPOX Indexes and Index Returns YTD:
Key IPOX Indexes
Return
Week (%)
2011 Return YTD (%)
+/- Benchmark YTD
IPGLC (Global)
-0.37
4.49
IPGL100 (Global)
0.40
5.51
Significant+
IPGL50 (Global)
-1.58
5.51
Significant+
IPGL30 (Global)
-0.26
6.46
Significant+
WTD (Global)
-3.51
-0.47
IPXO (U.S.)
-2.00
7.74
Significant +
IPXT (U.S.)
-1.89
8.28
Significant +
IXTE (Europe)
-0.29
2.02
Significant +
IPXUJPEU (Europe)
-0.31
1.78
IPTA (APAC)
-0.04
11.24
Significant +
IPXUAPUS (APAC)
-0.95
11.24
Significant +
IPXUEM (EM)
1.65
0.10
IPXUBRIC (EM)
1.20
-4.32
IPXUCHCP (China)
-1.65
2.51
Significant +
CNI (China)
-1.54
3.07
Significant +
IPXUCHAP (China A)
0.19
-6.96
Significant -
IPXUCAUP (China A)
-0.03
-7.42
Significant -
IPXULATM (LatAm)
3.64
-3.91
Significant -
IPXULATT (LatAm)
4.32
-4.51
Significant -
Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: The IPOX Indexes and respective IPOX-linked investment products may be long or short aforementioned companies.