Direxion Changes Reverse Split Dates for Two ETFs
Direxion has announced a date change for the reverse share splits of its MUD and TSLS exchange-traded funds. The company did not immediately provide the new effective date for the splits.
A 1-for-10 reverse split is planned for both ETFs, meaning for every ten shares an investor holds, they will receive one. The per-share price will increase tenfold, but the total value of the investment will remain the same, excluding cash payments for any fractional shares. ETF issuers use reverse splits to keep a fund's share price above an exchange's minimum listing requirements, often $1.00 per share. A higher share price can also improve perception among institutional investors who may have policies against purchasing low-priced securities. The Direxion Daily TSLA Bear 1X Shares (TSLS) is an inverse fund providing a return opposite to the daily performance of Tesla, Inc. stock. The fund's 52-week price range has touched as low as $4.62, a common trigger for a reverse split to boost the nominal share price. The Direxion Daily MSCI Mexico Bull 3X Shares (MUD) is a leveraged ETF designed to deliver three times the daily performance of a Mexico-focused equity index. Leveraged products can experience "volatility decay" over time, making periodic reverse splits a more common tool to maintain a suitable trading price. The process is handled electronically by the Depository Trust Company (DTC), which adjusts holdings in shareholder accounts. Investors holding a number of shares not divisible by ten will have the resulting fractional share automatically redeemed for cash at its net asset value. While a reverse split can be a warning sign for an individual company, it is often a routine structural adjustment for geared ETFs like MUD and TSLS. These funds use derivatives and daily rebalancing, which can lead to share price erosion that such splits are designed to correct.
