Stock splits are not uncommon. In fact, some of the sexiest names on Wall Street, including Apple (NasdaqGS: AAPL) and most recently, Netflix (NasdaqGS: NFLX), have split their shares. Finding traditional forward splits in the exchange traded funds space, well, that is another matter.
Some market observers argue that ETF issuers might want consider more forward split as a means of boosting interest and volume among retail investors, reports Chris Dieterich for Barron’s.
“ETF sponsors should likely do the same analysis that many large corporations regularly consider: ‘Should we split our stock?’ Conversely, those considering adding new products to compete against existing funds should think about offering a more ‘Affordable’ alternative if the competition’s price is +$100,” said Nicholas Colas, chief market strategist at brokerage ConvergEx, in a note posted by Barron’s.
There might be something to that argument. There are approximately 1,700 exchange traded products listed on U.S. exchanges and nearly 150 carry triple-digit price tags, according to Finviz data. Interestingly, the bulk of the highest-priced ETFs are issued by the three largest issuers: BlackRock’s (NYSE: BLK) iShares, Vanguard and State Street’s (NYSE: STT) State Street Global Advisors.
Of the 20 highest-priced ETFs, 14 are broad market funds such as the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and the Vanguard 500 Index (NYSEArca: VOO). Five are healthcare ETFs with the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) sporting the highest price tag of any ETF. IBB, the largest biotech ETF by assets, closed just below $391 on Wednesday after flirting with $400. [Biotech ETF Run not Over Yet, Says Analyst]
Forward splits are not uncommon among ETF issuers, but the bulk of those transactions come courtesy of sponsors of inverse and leveraged ETFs.
For example, in May, ProShares, the largest issuer of geared ETFs, announced forward splits for 12 of its 12 ETFs. In late April, ProShares rival Direxion said it is splitting 19 of its geared funds. The splits include eight reverse splits and 11 traditional, or forward splits. [Direxion to Split 19 ETFs]
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.