ETF News: Big Changes at Direxion Gold and Oil ETFs

ETF News: Big Changes at Direxion Gold and Oil ETFs

ETF News: Big Changes at Direxion Gold and Oil ETFs

Direxion has announced it will execute reverse share splits for four of its leveraged exchange-traded funds (“ETFs”), as well as forward share splits for another five leveraged ETFs. The total market value of the shares outstanding will not be affected as a result of these splits, except with respect to the redemption of fractional shares, as outlined below.

Four Reverse Splits
Direxion will execute a 1-for-4 reverse split of the Direxion Daily Natural Gas Related Bear 3X Shares. The firm will also execute a 1-for-5 reverse split of the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares, Direxion Daily Gold Miners Index Bear 3X Shares and Direxion Daily Junior Gold Miners Index Bear 3X Shares. The splits are effective at the open of the market on Aug. 25, 2016.

A summary of the four ETFs undergoing reverse splits is as follows (please note the CUSIP changes, effective Aug. 25, 2016):

ETF

Ticker

Current CUSIP

New CUSIP

Ratio

Approximate
Decrease In Total
Number Of
Outstanding Shares

Direxion Daily Natural Gas
Related Bear 3X Shares

GASX

25490K364

25490K117

1:4

75%

Direxion Daily S&P Oil & Gas
Exp. & Prod. Bear 3X Shares

DRIP

25490K729

25490K125

1:5

80%

Direxion Daily Gold Miners
Index Bear 3X Shares

DUST

25490K232

25490K133

1:5

80%

Direxion Daily Junior Gold
Miners Index Bear 3X Shares

JDST

25490K224

25490K141

1:5

80%

 

As a result of this reverse split, every four or five shares of a Fund will be exchanged for one share as indicated in the table above. Accordingly, the total number of the issued and outstanding shares for the Funds will decrease by the approximate percentage indicated above. In addition, the per share net asset value (“NAV”) and next day’s opening market price will be approximately four- or five-times higher for the Funds. Shares of the Funds will begin trading on the NYSE Arca, Inc. (the “NYSE Arca”) on a split-adjusted basis on Aug. 25, 2016.

The next day’s opening market value of the Funds’ issued and outstanding shares, and thus a shareholder’s investment value, will not be affected by the reverse split. The table below illustrates the effect of a hypothetical 1-for-4 or 1-for-5 reverse split anticipated for the Funds, as applicable and described above:

1-for-4 Reverse Split

Period

# of Shares Owned

Hypothetical NAV

Total Market Value

Pre-Split

120

$10

$1,200

Post-Split

30

$40

$1,200

 

1-for-5 Reverse Split

Period

# of Shares Owned

Hypothetical NAV

Total Market Value

Pre-Split

120

$10

$1,200

Post-Split

24

$50

$1,200

 

Five Forward Splits
Additionally, Direxion will execute forward splits of the Direxion Daily Brazil Bull 3X Shares, Direxion Daily Real Estate Bull 3X Shares, Direxion Daily 20+ Treasury Bull 3X Shares, Direxion Daily Gold Miners Index Bull 3X Shares and the Direxion Daily Junior Gold Miners Index Bull 3X Shares.

After the close of the markets on Aug. 24, 2016 (the “Payable Date”), each Fund will affect a split of its issued and outstanding shares as follows:

ETF

Ticker

Forward Split Ratio

Approximate Increase In
Total Number Of
Outstanding Shares

Direxion Daily Brazil Bull 3X Shares

BRZU

4-for-1

300%

Direxion Daily Real Estate Bull 3X Shares

DRN

4-for-1

300%

Direxion Daily 20+ Treasury Bull 3X Shares

TMF

4-for-1

300%

Direxion Daily Gold Miners Index Bull 3X
Shares

NUGT

5-for-1

400%

Direxion Daily Junior Gold Miners Index
Bull 3X Shares

JNUG

10-for-1

900%

 

As a result of these share splits, shareholders of each Fund will receive an additional four, five or ten shares for each share held of the applicable Fund as indicated in the table above.  Accordingly, the number of each Fund’s issued and outstanding shares will increase by the approximate percentage indicated above.

All share splits will apply to shareholders of record as of the close of NYSE Arca, Inc. (the “NYSE Arca”) on Aug. 23, 2016 (the “Record Date”), payable after the close of the NYSE Arca on the Payable Date.  Shares of the Funds will begin trading on the NYSE Arca on a split-adjusted basis on Aug. 25. 2016 (the “Ex-Date”). On the Ex-Date, the opening market value of each Fund’s issued and outstanding shares, and thus a shareholder’s investment value, will not be affected by the share split.  However, the per share net asset value (“NAV”) and opening market price on the Ex-Date will be approximately one-fourth, one-fifth or one-tenth for the Funds.  The tables below illustrate the effect of a hypothetical 4-for-1, 5-for-1 and 10-for-1 split on a shareholder’s investment.

4-for-1 Share Split

Period

# of Shares Owned

Hypothetical NAV

Total Market Value

Pre-Split

100

$40

$4,000

Post-Split

400

$10

$4,000

 

5-for-1 Share Split

Period

# of Shares Owned

Hypothetical NAV

Total Market Value

Pre-Split

100

$50

$5,000

Post-Split

500

$10

$5,000

 

10-for-1 Share Split

Period

# of Shares Owned

Hypothetical NAV

Total Market Value

Pre-Split

100

$100

$10,000

Post-Split

1,000

$10

$10,000

 

Redemption of Fractional Shares and Tax Consequences for Each Reverse and Forward Split
As a result of the reverse or forward split, a shareholder of a Fund’s shares could potentially hold a fractional share. However, fractional shares cannot trade on the NYSE Arca. Thus, a Fund will redeem for cash a shareholder’s fractional shares at the Fund’s split-adjusted NAV as of the Record Date. Such redemption may have tax implications for those shareholders and a shareholder could recognize a gain or loss in connection with the redemption of the shareholder’s fractional shares. Otherwise, the reverse or forward split will not result in a taxable transaction for holders of Fund shares. No transaction fee will be imposed on shareholders for such redemption.

“Odd Lot Unit”
Also as a result of the reverse or forward split, the Funds will have outstanding one aggregation of less than 50,000 shares to make a creation unit, or an “odd lot unit.” Thus, the Funds will provide one authorized participant with a one-time opportunity to redeem the odd lot unit at the split-adjusted NAV or the NAV on such date the authorized participant seeks to redeem the odd lot unit.

About Direxion:

Direxion builds bold products for investors who want more than the status quo. Our index-based products deliver directional options, magnified exposure, and long-term, rules-based strategies. Founded in 1997, the company has approximately $10.4 billion in assets under management as of June 30, 2016. Direxion’s diverse suite of products helps investors navigate today’s ever-changing markets. For more information, please visit www.direxioninvestments.com.

There is no guarantee that the Funds will achieve their objectives.

For more information on all Direxion Shares daily leveraged ETFs, go to direxioninvestments.com, or call us at 866-476-7523.

The ETFs are not suitable for all investors and should be utilized only by investors who understand the risks associated with seeking daily leveraged and inverse investment results, and intend to actively monitor and manage their investments. Due to the daily nature of the leveraged and inverse investment strategies employed, there is no guarantee of long-term inverse returns. Past performance is not indicative of future results.

An investor should consider the investment objectives, risks, charges, and expenses of Direxion ETFs carefully before investing. The prospectus and summary prospectus contains this and other information about Direxion ETFs. Download a prospectus and summary prospectus at direxioninvestments.com. The prospectus and summary prospectus should be read carefully before investing.

Risks:

An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration risk that results from the Funds’ investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts, forward contracts, options and swaps are subject to market risks that may cause their price to fluctuate over time. The Funds do not attempt to, and should not be expected to, provide returns which are a multiple of the return of the Index for periods other than a single day. For other risks including correlation, compounding, market volatility and specific risks regarding each sector, please read the prospectus.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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