A Flurry Of IPOs Might Lift IPO ETF

The U.S. IPO space, which was subdued at the start of 2015, looks to be on fire this week. As per Renaissance Capital, as many as 14 companies are slated to go public this week. This makes the week starting from May 4 the ‘busiest week’ of 2015 so far, per 247wallst.com.

Investors should note that after a massive run last year, the IPO market cooled down considerably in the first quarter of 2015. Per Renaissance, 34 IPOs raised $5.4 billion in capital, making Q1 of 2015 the most inactive per IPO tally since 1Q of 2013. Also, the proceeds from

IPO were the least since 3Q of 2011. Only, the health care sector managed to tread water in the gloomy U.S. IPO market
Rising rate worries, a strong dollar and later a moderation in U.S. growth have probably raised concerns over the space. However, with the Fed repeatedly hinting at a delayed rate hike, the space has now bucked up.

Companies Going Public This Week

Renaissance Capital’s IPO schedule indicated that the following companies are making a public market debut this week. These are Tallgrass Energy GP LP, Adaptimmune Therapeutics Plc (NASDAQ:ADAP), International Market Centers, Commercial Credit, Bojangles, Collegium Pharmaceutical Inc (NASDAQ:COLL), aTyr Pharma Inc (NASDAQ:LIFE), Colucid Pharmaceuticals Inc (NASDAQ:CLCD), Klox Technologies, MultiVir, Gelesis, Anterios, Htg Molecular Diagnostics Inc (NASDAQ:HTGM) and OpGen Inc (NASDAQ:OPGN).

The deal size ranges from $15 million to $900 million with OpGen having the lowest and Tallgrass Energy leading. Like Q1, the offerings are ruled by the health care and biotech space, with 10 out of 14 companies being bio-pharmaceuticals.

Looking at the trend, one can assume that the sagging scenario of Q1 in the U.S. may turn around in Q2. Things are looking better at the international arena as ample cheap money will shore up corporate activities at foreign shores.

Still, investors having faith in the revival of domestic operations might take a look at two IPO ETFs that are presently on offer. This is especially true given that the U.S. markets are now in the most active IPO week ‘since the week of July 28, 2014’, per Renaissance Capital.

Renaissance IPO (NYSE:IPO)

Holding 56 stocks in the basket, the fund follows the Renaissance IPO Index, which holds the largest and most liquid newly listed U.S. initial public offerings. New companies seek inclusion on a ‘fast entry basis’ on the fifth day of trading. Currently, the product allocates more to Alibaba (NYSE:BABA) at 9.04%, closely followed by Twitter (NYSE:TWTR) (7.46%) and Hilton (5.91%). Mid caps rule the portfolio with over half of the allocation.

IPO ETF has attracted $28 million in its asset base. The ETF sees low volume of nearly 10,000 shares, suggesting additional cost beyond the expense ratio of 0.60%. From a sector look, technology stocks make up for over one-third share followed by consumer discretionary (20%), financials (17%) and health care (10%). The fund has added 6% year to date (as of May 4, 2015).

First Trust US IPO (NYSE:FPX)

This ETF targets the U.S. IPO market and follows the IPOX-100 U.S. Index. It has accumulated $673.3 million in AUM and charges 60 bps in fees a year. Volume is decent as it exchanges around 75,000 shares in hand on average. In total, the fund holds 100 securities.

The product has a nice mix of sectors, with the top two being consumer discretionary (23.87%) and information technology (22.01%). The red hot IPO sector health care takes about 18.55% of the basket.

Since the ETF focuses on the 100 largest and most liquid U.S. IPOs, new companies can find entry into the fund’s holding after trading for a minimum of 100 days. FPX is up 7.5% so far this year (as of May 4, 2015).

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