Daily ETF Watch: 16 ProShares ETFs Split

January 16, 2014

It’s time to reverse-split a number of ETFs that were hammered by last year’s rally.

ProShares declared 1-for-4 reverse share splits on 16 ETFs—most of them short equity strategies—which will increase the price per share of each ETF with a proportionate decrease in the number of shares outstanding. Tickers for the ETFs won’t change when the splits are effective on Jan. 24.

It’s no surprise that funds shorting equities—and leveraged funds, no less—would fall sharply during a period when equities do well. The S&P 500 Index, after all, rose by almost 33 percent in 2013. In fact, stock markets around the world rose last year, and a fund such as the ProShares UltraShort MSCI Japan ETF (EWV) fell by about 40 percent.

ETF issuers undertake reverse splits for certain ETFs in order to lower per-share transaction costs, which can accrue for trades in lower-priced shares.

The move may help entice investors into the rapidly growing ETF space. Total U.S.-listed assets reached a record of more than $1.704 trillion on Wednesday, Jan. 15, taking out the previous record of $1.701 trillion set on the final trading day of 2013.

The ETFs, again, will undergo a 1-for-4 reverse split, meaning every four pre-split shares will result in the receipt of one post-split share, which will be priced four times higher than the NAV of a pre-split share.

The ETFs affected include the:

  • ProShares UltraShort MSCI Japan ETF (EWV)
  • ProShares UltraShort MSCI Europe (EPV)
  • ProShares UltraShort QQQ (QID)
  • ProShares UltraPro Short (SQQQ)
  • ProShares UltraPro Short MidCap 400 (SMDD)
  • ProShares UltraShort Russell 2000 Value (SJH)
  • ProShares Short SmallCap 600 (SBB)
  • ProShares UltraShort Industrials (SIJ)
  • ProShares UltraShort FTSE China 25 (FXP)
  • ProShares UltraShort MidCap 400 (MZZ)
  • ProShares UltraShort Russell 2000 (TWM)
  • ProShares UltraShort SmallCap 600 (SDD)
  • ProShares UltraShort Russell 2000 Growth (SKK)
  • ProShares Ultra Silver (AGQ)
  • ProShares Ultra VIX Short-Term Futures (UVXY)
  • ProShares UltraPro Short S&P 500 (SPXU)

Fractional Shares From Reverse Splits

For shareholders who hold quantities of shares that are not an exact multiple of the reverse-split ratio, the reverse split will result in the creation of a fractional share.

Post-reverse split fractional shares will be redeemed for cash and sent to your broker of record. This redemption may cause some shareholders to realize gains or losses, which could be a taxable event for those shareholders.

 

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