Initial Public Offering Index
‘Going public’ has effects on corporations globally which are truly unique and long-run in nature. It is also difficult to value newly listed companies because of the high level of information asymmetry at the IPO date. This is due to institutional constrains in the IPO marketplace, such as short selling restrictions, no historical beta, the ‘quiet’ period or limited analyst coverage. As companies progress once being listed, this information asymmetry works itself out in share price movements over the long term. These dynamics result in a large dispersion in long-run IPO returns, i.e. over time many IPO companies will eventually have underperformed and relatively few companies will have oveperformed. Exposure into the overperforming companies, however, can produce asset allocation benefits. An underlying force affecting the IPO markets has also been accounting reforms under Sarbanes-Oxley (“SOX”). This has resulted in higher quality of disclosure, which also means greater company transparency, an important factor especially for IPO companies.
The global IPO and spin-off market is economically significant and represents the lifeblood of global Equity Capital Markets (ECM) activity. Since the early 1990’s, an average of USD 750 bn p.a. in market cap has been created through IPO and spin-off activity globally. IPOs and spin-offs represent one of the most dynamically performing equity classes and offer a unique way for portfolio enhancement if tracked separately.
The IPOX Global Indexes encompass a scalable and dynamic index technology which seeks to unlock the potential asset allocation benefits associated with IPOs. With backtested history going back to 1989, the IPOX Global Indexes have been real-time and available on Bloomberg and Reuters since 2004 with Standard & Poor’s acting as the calculation agent. Please follow www.ipoxschuster.com for inquiries related to licensing and services offered by IPOX Schuster LLC.