Direxion, a leader in alternative investment solutions, has announced it will execute reverse share splits for seven of its leveraged exchange-traded funds (“ETFs”), as well as forward share splits for another two 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.
Reverse Splits
Direxion will execute 1-for-4 reverse splits of the shares of the Direxion Daily India Bull 3X Shares (INDL), Direxion Daily Real Estate Bear 3X Shares (DRV), Direxion Daily Semiconductor Bear 3X Shares (SOXS), Direxion Daily Developed Markets Bear 3X Shares (DPK) and Direxion Daily Natural Gas Related Bear 3X Shares (GASX), effective at the open of the markets on Tuesday, August 20, 2013. The firm will also execute a 1-for-5 reverse split of the shares of the Direxion Daily S&P 500 Bear 3X Shares (SPXS) and a 1-for-10 reverse split of the shares of the Direxion Daily Gold Miners Bull 3X Shares (NUGT), also effective at the open of the markets on Tuesday, August 20, 2013.
A summary of the seven ETFs undergoing reverse splits is as follows (please note the CUSIP changes, effective Tuesday, August 20, 2013):
| ETF | Current CUSIP | New CUSIP | Ratio |
| Direxion Daily Gold Miners Bull 3X Shares (NUGT) |
25459Y496 |
25459Y389 |
1:10 |
| Direxion Daily S&P 500 Bear 3X Shares (SPXS) |
25459W151 |
25459Y371 |
1:5 |
| Direxion Daily India Bull 3X Shares (INDL) |
25459W383 |
25459Y330 |
1:4 |
| Direxion Daily Real Estate Bear 3X Shares (DRV) |
25459Y660 |
25459Y363 |
1:4 |
| Direxion Daily Semiconductor Bear 3X Shares (SOXS) |
25459W128 |
25459Y314 |
1:4 |
| Direxion Daily Developed Markets Bear 3X Shares (DPK) |
25459W169 |
25459Y355 |
1:4 |
| Direxion Daily Natural Gas Related Bear 3X Shares (GASX) |
25459W219 |
25459Y322 |
1:4 |
Forward Splits
In addition, Direxion will execute 2-for-1 forward splits of the shares of the Direxion Daily Gold Miners Bear 3X Shares (DUST) and Direxion Daily Healthcare Bull 3X Shares (CURE) according to the following schedule:
Ex-Date: Tuesday, August 20, 2013
Record Date: Friday, August 16, 2013
Payable Date: Monday, August 19, 2013
A summary of the two ETFs undergoing forward splits is as follows (CUSIPs remain the same):
| ETF | CUSIP | Ratio |
| Direxion Daily Gold Miners Bear 3X Shares (DUST) |
25459W235 |
2:1 |
| Direxion Daily Healthcare Bull 3X Shares (CURE) |
25459Y876 |
2:1 |
Shares of the Funds will begin trading on the NYSE Arca on a split-adjusted basis on 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-half for the Funds. As stated previously, the total market value of the shares outstanding will not be affected as a result of the reverse and forward splits, except with respect to the redemption of fractional shares, as outlined below.
The Depository Trust Company (“DTC”), the registered owner of all ETF shares, has been notified of the reverse and forward splits and has been instructed to adjust each shareholder’s investment accordingly.
Hypothetical Example of 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 |
Hypothetical Example of 2-for-1 forward split:
| Period | # of Shares Owned | Hypothetical NAV | Total Market Value |
| Pre-Split | 100 | $30 | $3,000 |
| Post-Split | 200 | $15 | $3,000 |
Redemption of Fractional Shares and Tax Consequences for Each Reverse and Forward Split
As a result of the reverse and forward splits, a shareholder of each Fund 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 as of the respective Effective/Record Date. Such redemption may have tax implications for those shareholders and a shareholder could recognize gain or loss in connection with the redemption of the shareholder’s fractional shares. Otherwise, the reverse and forward 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 and forward splits, the ETFs 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.
