What this means for holders of VXUP and VXDN, on the next regularly scheduled Regular Distribution, in this case, September 15, the funds will allocate an equal number of offsetting shares – holders of the Up Class Shares as of September 15 will be issued an equal number of the shares of the Down Class Shares, and vice versa, resulting in a risk-neutral exposure to equity volatility. In short, this means that shareholders will own a position in both Up and Down shares after the September 15 distribution declaration.

As measured against spot VIX, premiums and discounts in the shares have alienated some investors and it will be interesting to see the impact of the corrective on trading prices. It is also likely that the fund management is evaluating other options to help correct this issue.

On September 8, AccuShares also gave a 10-day notice of the estimated Regular Distribution and the Corrective Distribution, which results in equal and offsetting shares, and a reverse share split at a specified conversion rate – according to the prospectus, reverse share splits are triggered after the class value per share dips below $4.00. VXUP was trading at around $1.5 and VXDN was at $1.9 Wednesday.

On September 15, AccuShares will announce its Regular Distribution to either VXUP or VXDN, depending on the close of the VIX on that day, as well as announce the Corrective Distribution and the Reverse Share Split. Investors who receive an equal amount of the opposite share class as a result of the Corrective Distribution will have to evaluate their portfolios post Reverse Split to determine which exposures they are interested in maintaining.

For more information on the CBOE Volatility Index, visit our VIX category.

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