Direxion Announces A Number Of Reverse Splits For Its Leveraged ETFs
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.
NUGT currently has an ETF Daily News SMART Grade of F (Strong Sell), and is ranked #13 of 21 ETFs in the Leveraged Commodities ETFs category.
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%.
JNUG currently has an ETF Daily News SMART Grade of F (Strong Sell), and is ranked #14 of 21 ETFs in the Leveraged Commodities ETFs category.
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