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IPO Market Hot This Week: ETFs to Tap

Sweta Killa
Germany's GDP is set to grow at an impressive pace this year, per latest report by the International Monetary Fund (IMF).

The U.S. IPO market is sizzling this week with 11 deals that will collectively raise more than $2 billion. This will mark the busiest week of this year. In particular, the Chinese companies have been at the forefront with the second-largest mobile search engine Sogou (SOGO) expected to go public on Nov 9. The company plans to raise $540 million at a market capitalization of $4.8 billion (read: What Lies Ahead for China Tech ETFs?).

PPDAI Group (PDPF), a China-based consumer lending platform, plans to raise $298 million at a valuation of $5.7 billion on Nov 10. Chinese tutoring company Four Seasons Education (FEDU) is expected to raise up to $120 million with new listing on Nov 8.

This was followed by the two immunotherapy biotech IPOs InflaRx (IFRX) and Apellis Pharmaceuticals (APLS) on Nov 8 and Nov 9, respectively. Apellis will likely raise $185 million while IFRX would raise $122.7 million. The banking sector is also in focus this week with Metropolitan Bank Holding (MCB) and CBTX (CBTX) going public on Nov 8, raising $121.2 million and $71.8 million, respectively (read: Time to Buy Regional Bank ETFs?).

Other IPOs are WorkSpace Property Trust (WSPT), a real-estate investment trust, which is planning to raise $672.7 million; Bandwidth Inc. (BAND), a cloud-based communications platform, planning to raise $101.2 million; and Erytech Pharma (ERYP), a French biopharmaceutical company, expected to raise $121.3 million. These IPOs are due on Nov 10.

Investors looking to profit from these IPOs should invest in them in a basket form. While not all might be successful and investing in many simultaneously could be difficult, investors should bet on the following two IPO ETFs that offer a low-risk and diversified exposure to the newly minted companies.

First Trust US IPO Index Fund FPX

This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holdings after trading for a minimum of 100 days. In total, the fund holds 101 securities in its basket. The product has a nice mix of sectors, with the top four being information technology, healthcare, consumer discretionary and consumer staples. The fund has accumulated $923 million in AUM and sees volume of about 72,000 shares per day. It charges 60 bps in fees a year and has gained 22.6% in the year-to-date time frame (see: all the Total Market U.S. ETFs here).

Renaissance IPO ETF IPO

This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a ‘fast entry basis’ on the fifth day of trading. The fund holds 39 stocks in its basket. From a sector look, technology is the top sector, accounting for 38% while consumer discretionary and industrials round off the next two spots with double-digit allocation each. The fund has amassed $16.7 million in its asset base while it trades in a light volume of around 4,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. IPO is up 33.8% so far this year.

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RENAIS-IPO ETF (IPO): ETF Research Reports
 
FT-IPOX 100 (FPX): ETF Research Reports
 
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