Investors who have invested in certain VelocityShares ETNs need to make some decisions soon. Credit Suisse, which backs almost all of the VelocityShares ETNs, is delisting nearly half of the VelocityShares lineup in the first half of July, and failing to divest of one’s holdings could leave an investor struggling to sell their shares in the over-the-counter market, where liquidity is often hard to find.
The affected ETNs were set to mature on different dates between December 2030 and February 2032 and include the following, along with their assets under management:
- VelocityShares 3x Long Gold ETN (UGLD), $268 million
- VelocityShares 3x Long Silver ETN (USLV), $389 million
- VelocityShares 3x Inverse Gold ETN (DGLD), $14 million
- VelocityShares 3x Inverse Silver ETN (DSLV), $24 million
- VelocityShares 3x Long Natural Gas ETN (UGAZ), $506 million
- VelocityShares 3x Inverse Natural Gas ETN (DGAZ), $118 million
- VelocityShares Daily Inverse VIX Medium Term ETN (ZIV), $66 million
- VelocityShares VIX Short Term ETN (VIIX), $55 million
- VelocityShares Daily 2x VIX Short Term ETN (TVIX), $1.4 billion
It’s not entirely clear why the ETNs are closing as they are mostly quite liquid with significant assets under management. While the smallest has just $14 million under management, more than half of the affected products have more than $100 million in assets and TVIX, in particular, has well over $1 billion.
However, this isn’t the first time VelocityShares ETNs backed by Credit Suisse have delisted unexpectedly. In 2016, Credit Suisse delisted the VelocityShares 3x Long Crude Oil ETN (UWTI) and the VelocityShares 3x Inverse Crude Oil ETN (DWTI), which had $1.6 billion and $222 million in assets under management, respectively, at the time.
Unlike ETFs, ETNs qualify as a liability for the issuing company, which is typically a big bank. In 2016, Europe’s banks were struggling, and common speculation at the time of UWTI’s and DWTI’s delistings was that Credit Suisse was simply trying to clean up its balance sheet. The reason given in the press release for the current impending batch of ETN delistings is that Credit Suisse simply wants to to “better align its product suite with its broader strategic growth plans,” according to a press release.
Credit Suisse further stated in the press release that it would stop issuing new shares of the NYSE-listed ETNs (UGAZ and DGAZ) as of today, June 22, with the ETNs continuing to trade up to July 10. All of the other affected ETNs list on the Nasdaq exchange, where they will continue to trade until July 2, with new issuances suspended after that. The delistings of the nine ETNs become effective on July 12.
Investors should have an exit plan for these ETNs, as they will likely become infinitely more difficult to divest once they have delisted.
Contact Heather Bell at [email protected]