Reverse Share Split Set for UVXY
August 31, 2012
ProShares is planning a 1-for-10 reverse share split for the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA:UVXY) next week.
UVXY has been crushed by a 92% year-to-date loss because of major declines in stock market volatility. The VIX recently hit 5-year lows.
The leveraged fund aims for 200% daily magnification of short-term VIX futures contracts and the reverse split will affect shareholders of record as of the close of the markets on September 6, 2012. The fund will trade at its post-split price on September 7, 2012. The ticker symbol for the fund will not change. The fund will be issued a new CUSIP number.
The reverse split will increase the price per share of the fund with a proportionate decrease in the number of shares outstanding. For example, for a 1-for-10 reverse split, every 10 pre-split shares held by a shareholder will result in the receipt of one post-split share, which will be priced 10 times higher than the net asset value (NAV) of a pre-split share.
Fractional Shares from Reverse Splits
For shareholders who hold quantities of shares that are not an exact multiple of the reverse split ratio (for example, not a multiple of 10 for a 1-to-10 reverse split), the reverse split will result in the creation of a fractional share. Post-reverse split fractional shares will be redeemed for cash and sent to your broker of record.
This redemption may cause some shareholders to realize gains or losses, which could be a taxable event for those shareholders.
Here's an example of how a 1-for-10 reverse split works:
Period # of Shares Owned Hypothetical NAV Value of Shares
Pre-Split 1,000 $10.00 $10,000.00
Post-Split 100 $100.00 $10,000.00
Due to the compounding of daily returns, UVXY’s returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.
The reverse split will not change the value of a shareholder's investment. UVXY is the only ETF in the United States offering magnified exposure to VIX futures.
ProShares' lineup of 138 ETFs includes global fixed income, hedge strategies, geared (leveraged and inverse), and inflation and volatility ETFs.
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