Direxion is to execute reverse share splits for seven of its leveraged exchange-traded funds, as well as forward share splits for another two leveraged ETFs.
The total market value of the shares outstanding will not be affected as a result of these splits, except with respect to the redemption of fractional shares, as outlined below.
Direxion will execute one-for-four reverse splits of the shares of the Direxion Daily India Bull 3X Shares (INDL), Direxion Daily Real Estate Bear 3X Shares (DRV), Direxion Daily Semiconductor Bear 3X Shares (SOXS), Direxion Daily Developed Markets Bear 3X Shares (DPK) and Direxion Daily Natural Gas Related Bear 3X Shares (GASX), effective at the open of the markets on Tuesday, August 20, 2013.
The firm will also execute a one-for-five reverse split of the shares of the Direxion Daily S&P 500 Bear 3X Shares (SPXS) and a one-for-10 reverse split of the shares of the Direxion Daily Gold Miners Bull 3X Shares (NUGT), also effective at the open of the markets on Tuesday, 20 August, 2013.
In addition, Direxion will execute two-for-one forward splits of the shares of the Direxion Daily Gold Miners Bear 3X Shares (DUST) and Direxion Daily Healthcare Bull 3X Shares (CURE).
Shares of the funds will begin trading on the NYSE Arca on a split-adjusted basis on the ex-date. On the ex-date, the opening market value of each fund’s issued and outstanding shares, and thus a shareholder’s investment value, will not be affected by the share split. However, the per-share net asset value (NAV) and opening market price on the ex-date will be approximately one-half for the funds.
The Depository Trust Company (DTC), the registered owner of all ETF shares, has been notified of the reverse and forward splits and has been instructed to adjust each shareholder’s investment accordingly.
As a result of the reverse and forward splits, a shareholder of each fund potentially could hold a fractional share. However, fractional shares cannot trade on the NYSE Arca. Thus, a fund will redeem for cash a shareholder’s fractional shares at the fund’s split-adjusted NAV as of the respective effective/record date. Such redemption may have tax implications for those shareholders and a shareholder could recognise gain or loss in connection with the redemption of the shareholder’s fractional shares. Otherwise, the reverse and forward splits will not result in a taxable transaction for holders of fund shares. No transaction fee will be imposed on shareholders for such redemption.
Also as a result of the reverse and forward splits, the ETFs will have outstanding one aggregation of less than 50,000 shares to make a creation unit, or an “odd lot unit.” Thus, the funds will provide one authorised participant with a one-time opportunity to redeem the odd lot unit at the split-adjusted NAV or the NAV on such date the authorised participant seeks to redeem the odd lot unit.