Leveraged Inverse ETFs and Reverse Splits

Discussion in 'ETFs' started by the, Jan 12, 2012.

  1. the


    I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

    Anybody have any more information on when a reverse split happens?

    Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?
  2. This question is not relevant, but you can figure they'll do a split or, more likely, the reverse split when market makers tell them commission's killing them, or the effects of negative daily compounding reduce the ETF by more than 75% between each reverse split. That's been the sweet spot, and QID now has reverse split adjusted prices of $250, so when it breaks lower lows by 50-80% they'll do a reverse split. There won't ever be a split, only reverse splits.

    There's a possibility of a split in the 2x leveraged longs, but only a possibility of reverse splits for the all other leveraged inverses.
  3. 3x'es have split so I hope that was a typo on the "they won't ever split".

    You are just generally wrong in your overall assessment. The target NAV of an ETF has zero to do with the market makers or the split-adjusted-price.

    Think of it as a discretionary call. If I manage a risky & dangerous product I am usually pretty well aware. I'm also aware that I make money based on basis points of assets under management held overnight - so I need people to own my ETF - but I also want to make sure the right people own my ETF.

    If it gets below $5 some people can't buy and a lot of people can't sell it. If it gets over $60-$100 then the retail folks start to feel the BP (buying power) pain so they don't trade.

    There is a bit of a sweet spot - it isn't $6 to meet that $5 threshold because then every retail idiot in the world will be gambling - so best to keep it high so you weed out the people with no business being in the ETF - best also to keep it low enough (under $200 or so) so that people can actually trade round lots.

    Really it is called fiduciary responsibility and that means that the manager has your best interest. If you are worried about a split or action perhaps you should consider a different speculation vehicle. The manager may not want you to be in the ETF so the split may be against what you want - they may price you out to the high or low side.

    Call them. If you have any clout they will talk to you. If you get the runaround from an internal wholesaler then you probably shouldn't be trading a levered ETF if you are worried enough to call them up over something that's public and filed with the regulators.
  4. Fas/faz.. day of split when u look at it.,no announcement.

    Both where under $8 and falling.. at the same time!!

  5. http://bit.ly/xieN6P
  6. They have reverse split, that's different than split. I'm saying they will only reverse split.
  7. So tell me why all leveraged ETF's won't decline 90% in the next ten years, genius?

    You are clueless investing public to me.
  8. Didn't upro?

  9. I see 3:1 at $83 per share, now trading at $68 per share.
  10. I'm 100% certain that one of the 3x ETFs did a forward split not too long ago (made the price smaller with more shares) but I don't remember which one.

    I'm not home right now and only on the netbook so I don't have Bloomberg, databases, etc. but I'll look it up and post the ticker.

    It is only one of them (could have been FAS or FAZ) and it's the first one ever to have done it.

    I will find it and post.
    #10     Jan 20, 2012