SAN DIEGO (ETFguide.com) - Direxion has just executed reverse
share splits on two their most popular leveraged ETFs. Yesterday,
the Direxion Daily Financial Bull 3x Shares (NYSEArca: FAS) had a
1-for-5 reverse split and the Direxion Daily Financial Bear 3x
Shares (NYSEArca: FAZ) had a 1-for-10 reverse split. Shares in both
FAS and FAZ began trading today on a split-adjusted basis.
How did this particular reverse share split work?
Every five shares of FAS were exchanged for one share and every
ten shares of FAZ were exchanged for one share. For example, an
owner with 100 shares of FAS before the split would now have 20
shares after the split. In the case of FAZ, an owner of 100
pre-split shares would now have 10 post split shares.
As a result of the reverse split, some investors may wind up
with fractional shares of FAS or FAZ. Because fractional shares do
not trade on NYSE Arca, the fractional shares were automatically
redeemed for cash at each respective fund's net asset value (
) at the end of trading on July 8th.
According to Direxion, the redemption of fractional shares could
cause a shareholder to realize a capital gain or loss. However, the
reverse split itself will not cause a taxable event for FAS or FAZ
owners and there's no transaction fee charged for the
The reverse share splits on FAS and FAZ will facilitate more
economical trading in their shares. The share prices of both funds
fell to such low levels, the cost of bid/ask spreads was becoming a
A reverse share split inflates a fund's share price but doesn't
alter a fund's total market value.
With around $1.7 billion invested in FAS and $1.5 billion in FAZ
both sides of the long/short trade are almost evenly matched.