Direxion, the Newton, Mass.-based fund company known for its triple-exposure ETFs, is planning 1-for-5 reverse splits on five of its ETFs and a 1-for-3 reverse split on a sixth ETF, in a move that will decrease the number of shares and raise their prices.
The five ETFs that will undergo 1-for-5 reverse split are:
- Direxion Daily Financial Bear 3x Shares (NYSEArca: FAZ)
- Direxion Daily Large Cap Bear 3x Shares (NSEArca: BGZ)
- Direxion Daily Mid Cap Bear 3x Shares (NYSEArca: MWN)
- Direxion Daily Developed Markets Bear 3x Shares (NYSEArca: DPK)
- Direxion Daily Semiconductor Bear 3x Shares (NYSEArca: SOXS)
The 1-for-3 reverse split will occur on the Direxion Daily Small Cap Bear 3x Shares (NYSEArca: TZA), the company said in a press release.
All the reverse splits apply to shareholders of record after the close on Feb. 23, and post-split shares will be available to investors on Feb. 24, the company said.
As a result of the reverse splits, a shareholder of each ETF could potentially hold a fractional share.
Because fractional shares can’t trade on the New York Stock Exchange’s electronic platform, Arca, Direxion said it will redeem any shareholder’s fractional shares for cash at the fund’s split-adjusted net asset value (NAV) as of Feb. 23.
Also, such redemptions could cause a shareholder to realize a gain or loss. But without fractional shares, shareholders wouldn’t have a taxable event, Direxion said. It noted that no transaction fee will be imposed on shareholders for such redemption.
‘Odd Lot’ Unit
As a result of the reverse split, the ETFs will each have one aggregation of less than 50,000 shares to make a creation unit, also called an “odd lot unit.”
Direxion said each ETF will provide one authorized participant with a one-time opportunity to redeem the respective odd-lot unit at its split-adjusted NAV, or at the NAV on the date the authorized participant redeems the odd-lot unit.