Tag Archives: DRV

6 Direxion ETFs to See Reverse Splits

Direxion Shares announced it will execute reverse splits for six of its leveraged ETFs.

Five of the funds will experience a a 1-for-5 reverse split:
Direxion Daily Real Estate Bear 3x Shares (DRV)
Direxion Daily Emerging Markets Bull 3x Shares (EDC)
Direxion Daily Financial Bull 3x Shares (FAS)
Direxion Daily Latin America Bull 3x Shares (LBJ)
Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV)

The Direxion Daily Russia Bull 3x Shares (RUSL) will experience a 1-for-3 reverse split

The splits will go into effect for shareholders of record after the close of the markets on Wednesday, November 9, 2011. The shares of each ETF will be offered on a split-adjusted basis on November 10. As is the case with regular stock splits, the total market value of the shares outstanding will not be affected, except with respect to the redemption of fractional shares.

Unlike mutual funds, fractional shares of ETFs can’t be bought or sold. Thus, shareholders may redeem the fractional shares for cash at each ETF’s split-adjusted net asset value (NAV) as of November 9. These redemptions could cause a shareholder to realize a gain or loss. Otherwise, the reverse split will not result in a taxable transaction for holders of ETF shares. No transaction fee will be imposed on shareholders for such redemption.

The reverse split will result in each ETF having outstanding one aggregation of less than 50,000 shares to make a creation unit, or an “odd lot unit.” Direxion says each ETF will provide one authorized participant with a one-time opportunity to redeem the respective odd lot unit at its split-adjusted NAV, or at the NAV on such date the authorized participant seeks to redeem the odd lot unit.

Direxion Reverse Split Hits Tomorrow

Direxion, a provider of inverse and leveraged ETFs, will execute a 1-for-5 reverse split on four of its funds Wednesday, July 7.

  • Direxion Daily Energy Bear 3x Shares (ERY)
  • Direxion Daily Real Estate Bear 3x Shares (DRV)
  • Direxion Daily Small Cap Bear 3x Shares (TZA)
  • Direxion Daily Technology Bear 3x Shares (TYP)

This will reduce the number of shares outstanding in each fund by about 80%. The net asset value, or NAV, of each ETF share will increase 5-fold when markets open July 8.

This means if a shareholder owns five shares at the close of trading tomorrow, he will wake up with one share on Thursday. However, just like any split, the total market value of the shares will remain the same. For example, if before the split you own 100 shares at $5 for a total investment of $500, after the split you will have 20 shares priced at $25 apiece, for a total investment of $500. This may result in shareholders holding fractions of a share. Unlike mutual funds, ETFs can’t hold fractional shares, so investors will receive cash for any fractional share amount. This cash redemption may result in a gain or loss.

Direxion says, “Leveraged ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged investment results and intend to actively monitor and manage their investments. Leverage ETFs are not designed to track the underlying index over a longer period of time.”