After enduring massive declines at the hands of the underlying commodities they are designed to track, the VelocityShares 3x Long Crude ETN (NYSEArca: UWTI) and the VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) will be reverse split.
UWTI will be reverse split 1-for-10 while UGAZ will be reverse split 1-for-5.
“The reverse splits will be effective at the open of trading on September 10, 2015 and UWTI and UGAZ will each begin trading on the NYSE Arca on a reverse split-adjusted basis on such date. Holders of UWTI and UGAZ who purchased the ETNs prior to September 10, 2015 will receive one reverse split-adjusted ETN for every ten pre reverse-split UWTI ETNs and one reverse-split adjusted ETN for every five pre reverse-split UGAZ ETNs, respectively,” according to a statement issued by Credit Suisse, the issuing bank behind the ETNs.
ETNs are debt securities issued by financial institutions that promise to pay the return of an index, minus fees and taxes. Therefore, investors are exposed to the credit risk or the possibility the underwriting bank goes bankrupt. The note can be vulnerable if the issuer gets into financial trouble, otherwise known as a default. With an ETN, an investor can lose some or all of their investment if the ETN issuer goes under. [ETNs are not ETFs]
UWTI, which tracks three times or 300% the daily performance of WTI crude, closed at $1.19 last Friday. UGAZ, which is designed to be a triple-leveraged play on natural gas futures, closed at $1.63.
VelocityShares 3x Long Natural Gas ETN
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.