Direxion Announces Reverse Splits of Two ETFs: DRIP & SOXS
Direxion announced a reverse split for its ETFs: DRIP and SOXS. Effective after the market closes on March 25, 2022, each fund will execute a 1-for-10 reverse split, resulting in a 90% decrease in the total number of outstanding shares. The new shares will trade on a split-adjusted basis starting March 28, 2022. The reverse split will not affect total market value, although fractional shares will be redeemed for cash at the adjusted NAV, which may have tax implications for shareholders.
- Reverse split may stabilize share price by reducing outstanding shares by 90%.
- Shareholder investment value remains unaffected by the reverse split.
- Reverse splits can signal declining share performance or instability.
- Redemption of fractional shares could create unexpected tax implications for shareholders.
NEW YORK, Feb. 18, 2022 /PRNewswire/ -- Direxion has announced it will execute a reverse split of the issued and outstanding shares of the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (Ticker: DRIP) and the Direxion Daily Semiconductor Bear 3X Shares (Ticker: SOXS) (each, a "Fund" and collectively, the "Funds"). 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.
After the close of the markets on March 25, 2022, each Fund will affect reverse splits of its issued and outstanding shares as follows:
Fund Name | Reverse | Approximate decrease in |
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares | 1 for 10 | |
Direxion Daily Semiconductor Bear 3X Shares | 1 for 10 |
Please note the CUSIP changes, effective March 28, 2022:
Fund Name | Ticker | Current | New CUSIP |
25460G658 | 25460G328 | ||
25460G690 | 25460G336 |
As a result of these reverse splits, every ten 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 a Fund 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 ten-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 March 28, 2022.
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 one-for-ten reverse split anticipated for the Funds as described above:
1-for-10 Reverse Split | |||
Period | # of Shares | Hypothetical NAV | Total Market Value |
Pre-Split | 100 | ||
Post-Split | 10 | ||
Redemption of Fractional Shares and Tax Consequences of the Reverse Split
As a result of the reverse splits, a shareholder of a Fund's shares potentially could 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 after the close of the markets on March 25, 2022. 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 splits 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 splits, a Fund may have outstanding one aggregation of less than 50,000 shares to make a creation unit, or an "odd lot unit." Thus, a Fund 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.
The Trust's transfer agent will notify the Depository Trust Company ("DTC") of the splits and instruct DTC to adjust each shareholder's investment(s) accordingly. DTC is the registered owner of the Funds' shares and maintains a record of the Funds' record owners.
About Direxion:
Direxion equips investors who are driven by conviction with ETF solutions built for purpose and fine-tuned for precision. These solutions are available for a broad spectrum of investors, whether executing short-term tactical trades, or investing in thematic strategies. Direxion's reputation is founded on developing products that precisely express market perspectives and allow investors to manage their risk exposure. Founded in 1997, the company has approximately
There is no guarantee that the Funds will achieve their investment objectives.
For more information on all Direxion Shares daily leveraged ETFs, go to www.direxion.com, or call us at 866.301.9214.
Leveraged 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 carefully consider a Fund's investment objective, risks, charges, and expenses before investing. A Fund's prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund's prospectus and summary prospectus call 866-716-0735 or visit our website at direxion.com. A Fund's prospectus and summary prospectus should be read carefully before investing.
Direxion Shares 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 that results from an ETF's investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, daily compounding, market volatility and risks specific to an industry or sector, please read the prospectus.
Distributor: Foreside Fund Services, LLC.
CONTACT: | James Doyle |
JConnelly | |
973.850.7308 | |
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SOURCE Direxion
FAQ
What is the reverse split ratio for DRIP and SOXS?
When will the reverse split of DRIP and SOXS take effect?
What will happen to fractional shares after the reverse split?
How will the reverse split impact the opening market price of DRIP and SOXS?
What is the new CUSIP for DRIP after the reverse split?
What are the tax consequences of the reverse split for DRIP and SOXS?
