After a solid year for the markets, there are many companies that plan to conduct initial public offerings (IPOs) in 2020. Some companies already have formally filed their S-1 and equivalent forms with the U.S. Securities and Exchange Commission (SEC). Other companies have filed confidential data with the SEC for IPOs, and other so-called unicorn companies, those with private market valuations north of $1 billion, are all highly speculated to come public.
The 2019 IPO market was mixed for investors, with some unicorns tanking while others took off. Uber and Lyft were among those that got the worst of it, while Beyond Meat saw explosive growth. WeWork was on the menu, but as concerns around its valuation arose the company pulled back and has decided to remain private—at least for now.
In an effort to mitigate this risk and concern about picking the winners or the losers with each company that comes public, exchange-traded funds (ETFs) are available that offer a sampling and exposure to the IPO market. ETF Database has collected much of the information about these ETFs, among others, and made it easily accessible for those looking to get into the game.
Note that with companies constantly entering the market, these ETFs act as a revolving door, adding and deleting companies from their holdings on a quarterly basis.
Due to the nature of its holdings and the size of its assets under management, this one gets listed first. First Trust US Equity Opportunities ETF (NYSEARCA: FPX) has been around since April 2006, and it aims to track the IPOX-100 U.S. Index. This ETF is constructed and managed to provide a broad and objective view of global aftermarket performance of recent IPOs and spin-offs within the United States. These stocks remain eligible to be included for approximately four years. It was last seen to have $1.34 billion in assets under management. Its overall expense ratio is 0.59%, and it gained 30% in 2019. This fund has a total of 101 holdings. The top 10 holdings include all domestic companies:
- PayPal (4.38%)
- Thermo Fisher Scientific (4.04%)
- Verizon (3.54%)
- Sempra Energy (3.44%)
- Bristol-Myers Squibb (3.33%)
- Takeda Pharmaceutical (3.00%)
- Uber (2.97%)
- Fidelity National Information Services (2.90%)
- Tesla (2.83%)
- Zoetis (2.69%)
Renaissance IPO ETF (NYSEARCA: IPO) has been around since 2013, and it aims to track the Renaissance IPO Index. This ETF targets U.S. listed newly public companies ahead of their inclusion in core equity portfolios, it is designed to hold the largest, most liquid newly listed U.S. IPOs and include the most economically significant newly public companies. Note that companies that have been public for two years are removed from the ETF at the next quarterly review. It was last seen to have $41.2 million in assets under management. Its overall expense ratio is 0.60%, and it traded up 34% in 2019. This fund has 58 holdings. The top 10 holdings include a few recent sizable IPOs from the United States:
- Uber (10.34%)
- Spotify (8.36%)
- DocuSign (5.51%)
- Elanco Animal Health (5.15%)
- AXA Equitable (4.83%)
- VICI Properties (4.54%)
- Lyft (3.88%)
- Americold Realty Trust (3.07%)
- Ceridian HCM Holding (3.05%)
- PagSeguro Digital (2.91%)
Renaissance International IPO ETF (NYSEARCA: IPOS) has been around since October 2014, and it aims to track the Renaissance International IPO Index. The fund targets non-U.S. listed newly public companies ahead of their inclusion in core equity portfolios. It is designed to hold the largest most liquid newly listed non-U.S. IPOs, and it includes the most economically significant newly public companies. Note that companies that have been public for two years are removed from the ETF at the next quarterly review. It has $2.5 million in assets under management, its overall expense ratio is 0.80% and it posted gains of 15% in 2019. This ETF has 46 holdings, and the top 10 include entirely foreign-based firms, with most out of Germany and Hong Kong:
- Adyen (10.14%)
- Meituan Dianping (9.73%)
- SoftBank (9.63%)
- Xiaomi (8.25%)
- China Tower (6.47%)
- Notre Dame Intermedica Participacoes (4.99%)
- Siemens Healthineers (3.88%)
- Knor-Bremse (3.10%)
- Qulter PLC Hero (2.54%)
- Budweiser Brewing (2.52%)
First Trust International Equity Opportunities ETF (NASDAQ: FPXI) has been around since November 2014, and it tracks the IPOX International Index. The ETF is constructed and managed to provide a broad and objective view of global aftermarket performance of recent IPOs and spin-offs in both emerging and developed countries during their first 1,000 trading days. It had $52.8 million in assets under management. Its overall expense ratio is 0.70%, and it traded up about 34% in the past year. Out of the fund’s 51 holdings, the top 10 are all foreign firms, with a majority from China:
- SoftBank (4.96%)
- Shopify (4.63%)
- Siemens Healthineers (4.55%)
- Postal Savings Bank of China (4.54%)
- Prosus (4.53%)
- Orsted (4.45%)
- Ferrari (4.33%)
- Yum China (4.32%)
- Sanofi (4.15%)
- Adyen (4.05%)
While there are many overlaps and crossovers among these ETFs, the differences are equally pronounced. Not to mention these ETFs rebalance on a regular basis, incorporating the newest and biggest IPOs into them each quarter. There are also a couple of investment companies that either take venture stakes in pre-IPO companies or have acquired pre-IPO shares from insiders or other sellers.
Firsthand Technology Value Fund Inc. (NASDAQ: SVVC) offers a backdoor way to play the IPO market as it acquires shares of companies yet to come public. While these firms are more holding companies than ETFs, they offer similar exposure to all these individual firms. Imagine a smaller, scaled-down version of Berkshire Hathaway. Between them, some of their main holdings include Palantir, Spotify, Dropbox, Lyft, Hera, EQX Capital, Lyncean Tech, Pivotal Systems and QuickLogic.
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