ETF issuer Direxion announced it will complete reverse splits for a number of its leveraged funds this spring, including a couple of very popular gold mining ETFs.
In total, eight funds will see reverse splits, effective May 1, 2017. The split ratios vary from a modest 1-for-2 all the way up to a very highly leveraged 1-for-5. Consult the table below for the full list of funds affected, along with their split ratios and new CUSIPs.
|Fund Name||Ticker||Current CUSIP||New CUSIP||Reverse Split Ratio||Approximate decrease in total number of outstanding shares|
|Direxion Daily S&P 500® Bear 1X Shares||SPDN||25490K216||25460E869||1 for 2||50%|
|Direxion Daily Gold Miners Index Bull 3X Shares||NUGT||25490K570||25460E844||1 for 4||75%|
|Direxion Daily Junior Gold Miners Index Bull 3X Shares||JNUG||25490K554||25460E851||1 for 4||75%|
|Direxion Daily Junior Gold Miners Index Bear 3X Shares||JDST||25490K141||25460E877||1 for 4||75%|
|Direxion Daily Semiconductor Bear 3X Shares||SOXS||25490K778||25460E836||1 for 5||80%|
|Direxion Daily Regional Banks Bear 3X Shares||WDRW||25459Y124||25460E802||1 for 5||80%|
|Direxion Daily Russia Bear 3X Shares||RUSS||25490K786||25460E828||1 for 5||80%|
|Direxion Daily S&P 500® Bear 3X Shares||SPXS||25459Y371||25460E885||1 for 5||80%|
ETF issuers typically perform reverse splits on products in order to boost their share prices, keeping them safely above the psychologically important $5 level. The market value of futures-based products are often eroded over time due to contango in the futures markets, which inevitably leads to long-term share price declines.
It’s important to note that leveraged ETFs are not geared toward long-term shareholders. Instead, they’re marketed to risk-tolerant traders looking to enter and exit positions quickly.
The Direxion Daily Gold Miners Index Bull 3X Shares (NYSE:NUGT) was trading at $8.86 per share on Wednesday morning, down $0.62 (-6.54%). Year-to-date, NUGT has gained 15.97%, versus a 6.73% rise in the benchmark S&P 500 index during the same period.
Meanwhile, the Direxion Daily Junior Gold Miners Index Bull 3X Shares (NYSE:JNUG) was trading at $7.25 per share on Wednesday morning, down $0.6 (-7.64%). Year-to-date, JNUG has gained 29.93%.
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