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Play IPO's Decade-High Start to 2018 With These ETFs

Sanghamitra Saha
EBay (EBAY) just released its first quarter financial results, posting adjusted earnings of $0.53 per share and revenues of $2.58 billion.

The U.S. IPO market is off to a great start in 2018. About 10 more deals are expected to materialize by the end of the month and 2018 could see the busiest January for deals in four years, as per Renaissance Capital and quoted on MarketWatch.

The 10 deals are expected to raise about $5 billion, which will make January’s deal value worth about $8 billion. If this amount is realized, “it would be the most capital raised in the IPO market in January in more than a decade,” according to Renaissance principal Kathleen Smith.

The recent rise in IPO activity can be credited to a surging stock market, improving economic fundamentals and increasing consumer sentiment that have led to the appeal for new stocks with high growth potential (read: 5 Reasons Why 2018 Could be Good for IPO ETFs).

IPOs Likely to Hit the Market Soon

The MarketWatch article went on to highlight some of the biggest deals that may come up this month. One of the most sought-after of these is the IPO of PagSeguro Digital Ltd. a Brazilian fintech company that offers payment services to small and midsize companies. PagSeguro is expected to make a debut on the New York Stock Exchange under the ticker symbol “PAGS.”

Another one is Gates Industrial Corporation Plc, a U.K. manufacturer of engineered power transmission and fluid power equipment used in the construction, agriculture, energy, automotive and transportation sectors, among others. The company is to be listed on the NYSE under the ticker symbol “GTES.”

Other companies in the pipeline are Hudson Ltd., an operator of the Hudson “travel essentials” and bookstores found at airports across the United States and Canada. The ticker code will be HUD (read: 4 ETFs to Play if Dropbox Goes Public).

Corporación América Airports S.A. CAAP, an Argentine operator of airports, is expected to raise about $600 million in its IPO, and list on the NYSE under the ticker symbol “CAAP.”

PlayAGS Inc., a designer of electronic gambling machines and other products aimed at the gambling industry, is expected to list on NYSE with the ticker symbol “AGS.”

There are also biotech companies like Israeli Entera Bio Ltd, which is planning to hit the Nasdaq with a ticker code of “ENTX.” Solid Biosciences Inc., a Boston-based biotech firm is looking to list on Nasdaq under the ticker symbol “SLDB.”

What Lies Ahead?

Many "unicorns", or small- and mid-sized firms valued at more than $1 billion, may aim for listing in 2018, as quoted on Reuters. According to consultancy firm CB Insights, around 14 unicorns launched IPOs globally in 2017, against eight in 2016 and 10 in 2015. Most of those companies debuted in the United States. Ernst & Young too sees an uptick in unicorn IPOs in 2018. Market watchers are of the view that several cybersecurity IPOs are likely, given the rise and demand in the space.

Also, foreign companies eye United States as a hot spot for IPOs. “About a quarter of listings on U.S. exchanges in 2017 were by overseas firms, led by China,” as per Reuters. This year could be the same for the U.S. IPO market. Chinese smartphone maker Xiaomi may be up for an IPO in 2018, according to a recent Bloomberg report.

IPO ETFs to Play

Against this kind of an upbeat environment, one should keep a tab on IPO ETFs like First Trust US Equity Opportunities ETF FPX and Renaissance IPO ETF IPO. The duo added 33.8% and 32.4% in the last one year (as of Jan 22, 2018) respectively, against 25% gains in SPDR S&P 500 ETF SPY.

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