Question about USLV

[Corsair]

All-

Please forgive my ignorance on this, but I do have a question for the knowledgeable amongst you. I own some shares of USLV through an online stock trading site. As of last week, let's say I owned 60 shares, and the market value was something like $12 or $13/share. As of today, I log in to find that my "60" has now dropped into the single digits, but the price per share went up to around $100. What happened? How did the stock completely change like that?

Thanks all,
David

[beauanderos]

All-

Please forgive my ignorance on this, but I do have a question for the knowledgeable amongst you. I own some shares of USLV through an online stock trading site. As of last week, let's say I owned 60 shares, and the market value was something like $12 or $13/share. As of today, I log in to find that my "60" has now dropped into the single digits, but the price per share went up to around $100. What happened? How did the stock completely change like that?

Thanks all,
David

inverse split... 10 for 1. Same value, fewer shares

[zoomzoom71]

Generally speaking, why do they do splits? Is it a perception thing, thinking that if investors see a higher dollar/sh number that they may think it's more valuable? Sorry for the ignorant question.

[Corsair]

All-

Please forgive my ignorance on this, but I do have a question for the knowledgeable amongst you. I own some shares of USLV through an online stock trading site. As of last week, let's say I owned 60 shares, and the market value was something like $12 or $13/share. As of today, I log in to find that my "60" has now dropped into the single digits, but the price per share went up to around $100. What happened? How did the stock completely change like that?

Thanks all,
David

inverse split... 10 for 1. Same value, fewer shares

Thanks for the info, Ray. I agree with Zoomzoom. Why is this done? Cui bono? Who benefits?

[Morsecode]

Everybody benefits, theoretically. The company may benefit from an increased float. The benefit to investors is largely psychological, though most splits result in a modest immediate gain.

Look at Berkshire Hathaway B. Few years ago, Buffet caved in to demand and they went 50/1 split from $3500 a share down to $70. Investors ate it up.

Course, a single share of the voting stock, Berkshire Hathaway A, will set you back around $168,000

[rainsonme]

I believe this was an inverse split. This is a 3x leveraged ETF on silver; it holds silver futures contracts. Since it holds the contracts, there are some costs associated with holding the contracts, and they have to be rolled ----- meaning they HAVE to sell their contracts before they expire and buy new contracts. I am not sure why they did the reverse split; the value of the ETF appeared to be climbing before the split. Sometimes when stocks drop below certain thresholds, such as $10, $5, $2 ---- various funds are forced to drop them because they are precluded from holding stocks that are below certain $ value. I dont think that is the case here. And a 10 for 1 reverse split is pretty severe. I generally dont see it as a good sign when a stock does a reverse split. A regular split, where you get more shares and the float (shares on the open market) increases, is a good sign. I see a reverse split as negative. However, this isnt a stock, its a speculative, leveraged ETF. There must be some commentary on it somewhere, as to why Credit Suisse did this 10x reverse split. But thanks for bringing USLV to my attention; I will watch it.

[rainsonme]

I said this was an ETF ---- it is an ETN Exchange Traded Note. A slight difference.

I think that in the reverse split, any shares not divisible by 10 will be sold and your account credited with that cash ---- if you owned 65 shares before the reverse split, you will own 6 post split shares worth about 10 times what the pre-split shares were worth, and they will sell the odd 5 shares and credit your account with the money.

There is also a feature of these option/contract notes that I used to understand a long time ago, wherein they HAVE to buy US treasuries as security against the contracts that they roll forward ---- so you will also recieve the small interest on the short term treasuries that they hold --- this off-sets the costs a bit --- not much right now. Both the short term treasuries and the contracts roll forward at some pre-defined interval well ahead of expiration.

I didnt see any articles about WHY they did the inverse split. Looks like the pre-split price got down to around $4.50 a share in August? Maybe that triggered something in the rules for running this ETN when it broke under $5, and they were forced to execute the reverse split.

[Engineer]

I didnt see any articles about WHY they did the inverse split. Looks like the pre-split price got down to around $4.50 a share in August? Maybe that triggered something in the rules for running this ETN when it broke under $5, and they were forced to execute the reverse split.

My understanding is many of the large 401K funds, etc. have it written in their prospectus (prospecti?) that they won't invest in sub-$10 stocks/notes/funds. When USLV dropped below that threshold, the big houses had to stop buying.

With the inverse split, they'll be able to get those big players buying again.

[rainsonme]

wow, Mr. Engineer, James Earl Carter really did say that quote. Sorry for doubting, but I had to check. I just cannot imagine a context in which that would have been appropriate to say. Maybe he said it to a drunk and senile Breznef just to see if the interpreter was reading from a Moscow phone index or really translating.