Xerxes81 schreef op 28 november 2014 22:00:
Sharp declines in JNUG prompted Direxion to announce a reverse stock-split for JNUG next month that will raise the price of shares while keeping the value of the holdings the same for owners.
Direxion Investments, an exchange-traded fund sponsor best known for its leveraged offerings, announced it will implement reverse price splits for two ETFs next month.
Direxion said it will execute a 1-for-10 reverse split of the shares of the Direxion Daily Junior Gold Miners Bull 3X Shares (JNUG) on Dec. 23; the Direxion Daily Russia Bull 3X Shares (RUSL) will undergo a 1-for-6 reverse that same day.
Splits and reverse splits are a kind of housekeeping. Traders don’t want a fund that’s too pricey, or too cheap. In the cases of hard-hit JNUG and RUSL, the issue that is that these were getting too cheap.
Direxion points out in the release that the total market value of the shares outstanding will not be affected by the splits, except in the case of fractional shares, which will be swapped for cash.
While spits are generally a wash economically, it’s these fractional shares that can lead to unplanned gains (or losses) and, thus, unplanned tax events. This blogger covered the phenomenon for Barron’s last year.
In practice, holders of, say, 120 JNUG shares at $10 will suddenly see that they own 12 shares valued at $100; for RUSL, a trader who owned 120 shares for $10 would then own 20 shares priced at $60.