Global X looks to pump up miner and commodity ETF share prices through reverse splits.
Global X, the New York-based ETF company known for its commodity and emerging markets funds, plans to carry out reverse share splits on six ETFs on May 15 that have plunged in value in the past year, including three miner funds and the market’s only portfolio focused on Argentine stocks.
The six splits include a single 1-for-4 split; two 1-for-3 splits and three 1-for-2 splits, the company said in a press release. In the case of the 1-for-2 splits, the share price will double as the number of shares drop in half. Similar inverse relationships between the number of shares and the share price characterize each of the reverse splits.
The price trajectory of each group of ETFs in question—miners, materials, uranium and Argentina—have clear and distinct bearish tales as explanations. That said, the immediate motivation of a reverse split is to raise the share price, in part to minimize the magnitude of bid/ask spreads as a percentage of share price. Shareholders of record after the close of markets on Wednesday, May 15 are eligible for the splits.
On a macro level, miner shares, which have lagged gold bullion in recent years, sold off hard in recent weeks along with gold itself, as the motivation to buy gold in connection with easy-money policies by central banks began to lose some of its allure.
Materials in general have been in a downtrend ever since China’s economic growth began showing signs of slowing in the past year or so.
Uranium is a particular case, linked largely to Japan’s March 2011 nuclear/tsunami disaster, which led officials in the world’s No. 3 economy to shut 52 of its 54 electro-nuclear generating stations in the aftermath of that disaster.
Finally, Argentina is in a class of its own in terms of being shunned by investors in the face of macroeconomic mismanagement.
The reverse splits involved and each ETF’s current share price and decline in the past year are as follows:
- 1-for-4 Split: Global X Gold Explorers ETF (NYSEArca: GLDX), now trading at $3.87 a share after losing more than half its value in the past year
- 1-for-3 Split: Global X Uranium ETF (NYSEArca: URA), now trading at $5.88 a share after dropping 28 percent of its value in the past year
- 1-for-3 Split: Global X Junior Miners ETF (NYSEArca: JUNR), now trading at $6.42 after losing about a third of its value in the past year
- 1-for-2 Split: Global X FTSE Argentina 20 ETF (NYSEArca: ARGT), now trading at $9.04 after gaining 3.3 percent of its value in the past year
- 1-for-2 Split: Global X China Materials ETF (NYSEArca: CHIM), now trading at $7.89 after losing almost 6 percent of its value in the past year
- 1-for-2 Split: Global X Pure Gold Miners ETF (NYSEArca: GGGG), now trading at $6.70 after dropping more than 35 percent in the past year