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The FPX IPO Index

Written By Brian Hicks

Posted March 26, 2008

Eight trading days prior to the Visa IPO, we spoke of the First Trust IPOX-100 Index (FPX) as a possible beneficiary of the record-breaking IPO . . . and we were dead on. The FPX Index popped about $1.50 on the day of the IPO and is likely to move higher along with Visa.

As we said in Visa IPO: Profit from the Biggest IPO in U.S. History, Visa’s a company likely to deliver strong earnings for years to come. It’s the largest U.S. card processor in terms of transactions. And, unlike credit issuers, it doesn’t hold consumer debt on its books. That’s because it only issues cards, not credit. That concern lies with the banks that issue the credit.

Visa doesn’t have to worry about charge-offs, payment delays and higher delinquencies. The banks do, as do the likes of Discover (DFS:NYSE) and American Express (AXP:NYSE). Visa actually benefits from transaction fees as credit card debt balloons to $790 billion.

So it wasn’t a surprise when buyers paid $44 per share or close to $18 billion for shares of Visa on the day of the IPO . . . and it wasn’t a surprise when our First Trust IPOX-100 Index moved along with it.

Unfortunately, FPX is the only IPO-related recommendation I’ll stick with these days. Other than that, we’ve already seen $21.4 billion worth of IPOs get shelved, and we’re likely to see even more.

Since the start of 2008, 60 IPOs have been tabled. Thirty of those were in the U.S.

The IPO market is in shambles, with the volume of 2008 IPOs half of what it was a year earlier.

Just take a look at the list of IPO withdrawals we’ve found at since February 2008. It’s miserable out there.

  • Biotech LifeWatch withdraws IPO 3/21/2008
  • Prescription lens maker Vision-Ease Lens withdraws IPO 3/19/2008
  • SPAC China Pacific Acquisition withdraws IPO 3/18/2008
  • Biodiesel firm Renewable Energy Group withdraws IPO 3/17/2008
  • LCD product manufacturer ViewSonic withdraws IPO 3/5/2008
  • Fingerprint authentication provider UPEK withdraws IPO 3/4/2008
  • Medical device maker Transoma Medical withdraws IPO 2/21/2008
  • Mobile phone data services provider Danger withdraws IPO 2/20/2008
  • Coated paper manufacturer NewPage Holding withdraws IPO 2/15/2008
  • Medical device company Concentric Medical withdraws IPO 2/15/2008
  • Health services company Critical Homecare Solutions withdraws IPO 2/14/2008
  • Forum Oilfield Technologies withdraws IPO 2/11/2008
  • Communication services company McLeodUSA withdraws IPO 2/11/2008
  • Plains GP Holdings L.P. withdraws IPO 2/11/2008
  • Cancer treatment developer Light Sciences Oncology withdraws IPO 2/8/2008
  • Specialty coffee retailer Tully’s Coffee withdraws IPO 2/7/2008
  • Biotechnology company Archemix withdraws IPO 2/6/2008
  • Biopharmaceutical company Biolex Therapeutics withdraws IPO 2/1/2008

From here on out, I’d stick with FPX.

For those of you unfamiliar, this in the Index that tracks the U.S. IPOX-100 index, which inlcudes the 100 largest, typically best-performing and most liquid IPOs in teh U.S. It measures the average performance of U.S. IPOs during the first 1,000 trading days.

We’ve already seen it race from $18 to $26 on the heels of Mastercard (stock ran from $43 to $200) and First Solar (stock ran from $24 to more than $220). Now, with Visa a likely addition, upside to $20 isn’t out of the question, near-term.


FPX chart 032008

Ian L. Cooper