An IPO For IPOs

April 13, 2006

The IPOX-100 ETF begins trading on the American Stock Exchange, opening a unique window on innovation.

First Trust Advisors rang the opening bell at the American Stock Exchange (AMEX) this morning, April 13, to celebrate the launch of the new First Trust IPOX-100 exchange-traded fund (ETF).  The fund will track the IPOX-100 U.S. Index, a somewhat value-screened index of the 100 largest and most promising recent initial public offerings (IPOs). The ETF trades under the ticker symbol "FPX."

The IPOX-100 index contains the 100 largest components of the IPOX Composite Index, which features companies that have gone public in recent years. The index adds stocks on the seventh day of trading following their IPO and holds them through their 1000th day of trading, or about four years. 

"Academically, there's a lot of evidence to suggest that IPOs trade differently and are really a separate asset class from other companies," says Josef Schuster, founder and CEO of IPOX-Schuster, the creator of the index.  "Also, because the index is constantly updated, it provides exposure to the growth and innovative aspects of the economy (if you believe IPO and spin-off activity is a good proxy for that innovation)."

For detailed analysis of the IPOX-100 U.S. Index, see our coverage of the ETF filing here.

IPOs can be notoriously volatile, so the index includes a number of tweaks to prevent it from chasing the hottest performers.  For one, it does not hold the stocks of IPOs that shoot up on their first day of trading - Schuster says that those stocks tend to underperform in the long run.  Also, it includes spin-offs, which allows a small number of more established (and often larger) firms to enter the index.  The index is weighted by float-adjusted market capitalization, but it features a 10 percent maximum weighting to prevent it from being dominated by any single company. Right now, Google is the only company bumping up against that 10 percent cap.

The top ten holdings of the index as of March 17 were:

Ticker

Company

Weight

GOOG

Google

10.0%

VIA.B

Viacom

8.8%

GNW

Genworth Financial

4.7%

CME

Chicago Mercantile Exchange

4.3%

NYX

NYSE Group

4.0%

STX

Seagate Technology

3.5%

AMP

Ameriprise Financial

3.4%

CIT

CIT Group

3.2%

FSL

Freescale Semiconductor

3.1%

CCO

Clear Channel Outdoor Holdings

2.3%

* Data from IPOX-Schuster.

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