Difference In Structure
Further, the new ETNs will be callable, meaning Barclays can redeem them from investors when it sees the need to do so. When an ETN isn’t callable, if something goes wrong before it reaches its maturity, the issuer has very little recourse in terms of pulling the product off the market. This issue came into focus with GAZ, a very popular ETN that basically turned into a zombie fund when its creations were halted several years ago. Creations never restarted, and the product barely traded for nearly a decade, languishing in a weird sort of ETN limbo.
The problem was that it had no “call” feature and Barclays had no way to pull it off the market until the NYSE Arca deemed the ETN no longer suitable for listing on its exchange due to its low share price. The issuer launched GAZB as a replacement product last year, and the new product is callable.
Similar to GAZ, OIL has already had a replacement launched, the iPath Series B S&P GSCI Crude Oil ETN (OILB), which launched back in 2016.
Investors who hold the existing ETNs have a number of choices of what to do.
Options For Shareholders
Of course they can trade shares on the secondary market prior to the delisting, and after they can trade them over-the-counter (OTC), though liquidity and pricing (given that creations will be shut down) could be rather touch-and-go.
Another option is to put the ETNs back to Barclays, which has done away with the minimum redemption size—typically 20,000 to 50,000 shares, an amount that would be manageable only for institutional investors—for these ETNs and all of the others that will be closed or delisted as part of the changes to the iPath lineup. Investors simply need to find a broker to conduct the transaction. They can also choose between receiving cash in return for their ETNs or simultaneously receiving a corresponding amount of the new Series B ETNs tracking the same indexes as the ETNs they are putting back to Barclays.
Delistings & Redemptions
Beyond the previously mentioned products, another 34 ETNs, most of which have not gathered significant assets, will be either delisted or subject to redemption. The 16 ETNs that are delisting are as follows:
Following their delisting, the funds can be traded on the OTC market, but liquidity and pricing can become issues, as mentioned earlier.
The 18 ETNs that will be redeemed are in the below table:
ETNs To Be Redeemed
These ETNs do have a call feature, and their prospectuses indicate they can be redeemed by Barclays at the firm’s discretion. The redemption date is set for April 12, but shareholders will receive cash payments equal to the product’s closing indicative value as of April 5.
That said, the ETNs’ holders can also redeem the ETNs themselves, and again Barclays has waived the minimum redemption size for all of the ETNs being closed or delisted.
The press release notes that investors need not take any action regarding these changes if they so choose, but again, investors who do so will be stuck trying to unwind their investment in the OTC market.
Just to give you an idea of how wide-reaching the changes are, Barclays has a total of 72 products trading under its iPath brand and another nine trading under the Barclays brand.
Contact Heather Bell at [email protected]