Direxion Shares Announces Reverse Share Split Of ETF (MWN)

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June 22, 2009 3:45pm ETF BASIC NEWS NYSE:MWN

3xDirexion an ETF sponsor that offers 3X leveraged index funds, announced today that they will execute a reverse split for an ETF.  This will be one of the first of it’s kind for an ETF.  Leveraged ETF’s have become popular in the market as it allows investors to use leverage on a fund without margin.


As Market Wire Reports “Direxion, a pioneer in providing alternative investment strategies to sophisticated investors, announced today that it will execute a 1-for-2 reverse split of the shares of Direxion Daily Mid Cap Bear 3x Shares after the closing of the markets on Wednesday, June 24, 2009. MWN shares will begin trading on NYSE Arca, Inc. (NYSE Arca) on a split-adjusted basis on Thursday, June 25, 2009.”

“As a result of the reverse split, every two shares of MWN will be exchanged for one share. Accordingly, the number of MWN shares will decrease by approximately 50%, and the net asset value (NAV) and price of each share at the opening of the markets on Thursday, June 25, 2009 will double. The total market value of the MWN shares outstanding will not be affected as a result of this reverse split except with respect to the redemption of fractional shares, as discussed below,” Market Wire Reports.

Hypothetical Example of 1-for-2 reverse split:

 

                # of Shares  Hypothetical Hypothetical Total Market
Period             Owned         NAV      Market Price    Value
                ------------ ------------ ------------ ------------
Pre-Split                100 $      30.05 $         30 $      3,000
                ------------ ------------ ------------ ------------
Post-Split                50 $      60.10 $         60 $      3,000
                ------------ ------------ ------------ ------------

“Shareholders of MWN on June 24, 2009 will participate in the reverse split. The Depository Trust Company (“DTC”), the registered owner of all MWN shares, has been notified of the reverse split and is instructed to adjust each shareholder’s investment accordingly. Redemption of Fractional Shares and Tax Consequences for each Reverse Split. As a result of the reverse split, a shareholder of MWN could potentially hold a fractional share. However, fractional shares cannot trade on NYSE Arca. Thus, MWN will redeem for cash a shareholder’s fractional shares at MWN’s split-adjusted NAV as of June 24, 2009. Such redemptions could cause a shareholder to realize a gain or loss in connection with the redemption of the shareholder’s fractional share. Otherwise, the reverse split will not result in a taxable transaction for holders of MWN shares. No transaction fee will be imposed on shareholders for such redemption,” Market Wire Reports.

Will this be a sign of things to come from Direxion?  How will this sit with investors?  Time will tell!

Full Story: Here

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