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Warner Music Debut, New Offerings to Boost IPO ETFs
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The U.S. initial public offering (IPO - Free Report) market, which was hit hard by the coronavirus-led rout in March, seems to be to gathering steam with the debut of Warner Music Group on Nasdaq under the ticker name WMG. Shares surged as much as 20% in its first day of debut.
The world's third-largest recording label has returned to public markets after nine years as a private entity. It has raised $1.925 billion in IPO in the biggest deal of the year so far. The company increased the offering to 77 million shares at $25 per share from 70 million shares, valuing it at $12.75 billion.
Other companies are also preparing to hit the markets in the coming weeks. Pliant Therapeutics Inc. PLRX plans to offer 9 million shares, up from an earlier 6 million. Its shares are expected to be priced at $14-$16, raising $144 million at the top of the range (read: Race for Coronavirus Vaccine Heats Up: Biotech ETFs to Gain).
ZoomInfo Technologies ZI plans to raise up to $890 million through its offering of 44.5 million shares. The sales and marketing software company increased its price band to $20 per share from $16-$18. Online use-car seller Vroom Inc. VRM aims to offer about 18.8 million shares and raise about $318.8 million at the top end of the price range of $15-$17 per share.
How to Tap?
Investing in multiple IPOs at the same time can be a difficult task. So, investors can easily tap the IPO resurgence with the two domestic-focused ETFs discussed below. These funds have been seeing solid upside in recent weeks given the number of planned offerings (read: Solid Lyft-Uber Q1 Earnings Drive ETFs: Is it Safe to Play?).
This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast entry basis on the fifth day of trading. The fund currently holds 50 stocks in its basket, with each accounting for less than 10.5% exposure. Technology is the top sector accounting for 49.1% share while healthcare and communication services round off the next two spots with double-digit allocations each. The fund has amassed $43.5 million in its asset base while it trades in a light volume of about 20,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 24.2% in a month.
First Trust US Equity Opportunities ETF (FPX - Free Report)
This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 101 securities in its basket with the largest allocation going to the top two firms with at least 6% share each while other securities hold no more than 4.31% of the assets. The fund has accumulated $1.3 billion in AUM and witnesses volume of about 105,000 shares per day. It charges 70 bps in fees a year and has gained 13.2% in a month (read: PayPal Surges on Upbeat Q2 Outlook: ETFs to Benefit).
Bottom Line
Considering the number of offerings in the pipeline, investors looking to take advantage of new growth stocks should definitely bank on these two ETFs. The success of the new listings will provide fuel to the recovering IPO market.
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Warner Music Debut, New Offerings to Boost IPO ETFs
The U.S. initial public offering (IPO - Free Report) market, which was hit hard by the coronavirus-led rout in March, seems to be to gathering steam with the debut of Warner Music Group on Nasdaq under the ticker name WMG. Shares surged as much as 20% in its first day of debut.
The world's third-largest recording label has returned to public markets after nine years as a private entity. It has raised $1.925 billion in IPO in the biggest deal of the year so far. The company increased the offering to 77 million shares at $25 per share from 70 million shares, valuing it at $12.75 billion.
Other companies are also preparing to hit the markets in the coming weeks. Pliant Therapeutics Inc. PLRX plans to offer 9 million shares, up from an earlier 6 million. Its shares are expected to be priced at $14-$16, raising $144 million at the top of the range (read: Race for Coronavirus Vaccine Heats Up: Biotech ETFs to Gain).
ZoomInfo Technologies ZI plans to raise up to $890 million through its offering of 44.5 million shares. The sales and marketing software company increased its price band to $20 per share from $16-$18. Online use-car seller Vroom Inc. VRM aims to offer about 18.8 million shares and raise about $318.8 million at the top end of the price range of $15-$17 per share.
How to Tap?
Investing in multiple IPOs at the same time can be a difficult task. So, investors can easily tap the IPO resurgence with the two domestic-focused ETFs discussed below. These funds have been seeing solid upside in recent weeks given the number of planned offerings (read: Solid Lyft-Uber Q1 Earnings Drive ETFs: Is it Safe to Play?).
Renaissance IPO ETF (IPO - Free Report)
This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast entry basis on the fifth day of trading. The fund currently holds 50 stocks in its basket, with each accounting for less than 10.5% exposure. Technology is the top sector accounting for 49.1% share while healthcare and communication services round off the next two spots with double-digit allocations each. The fund has amassed $43.5 million in its asset base while it trades in a light volume of about 20,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 24.2% in a month.
First Trust US Equity Opportunities ETF (FPX - Free Report)
This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 101 securities in its basket with the largest allocation going to the top two firms with at least 6% share each while other securities hold no more than 4.31% of the assets. The fund has accumulated $1.3 billion in AUM and witnesses volume of about 105,000 shares per day. It charges 70 bps in fees a year and has gained 13.2% in a month (read: PayPal Surges on Upbeat Q2 Outlook: ETFs to Benefit).
Bottom Line
Considering the number of offerings in the pipeline, investors looking to take advantage of new growth stocks should definitely bank on these two ETFs. The success of the new listings will provide fuel to the recovering IPO market.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>