Yuanta Daily Taiwan 50 Bear -1X ETF (00632R.TW) will stop primary market redemption and secondary market transactions from today to December 10. Starting from December 11, it will be listed for trading with a new number of beneficial ownership units, and trading and redemption will resume.
The Taiwan Stock Exchange issued a press release on November 6 stating that Yuanta Funds's "Yuanta Daily Taiwan 50 Bear -1X ETF (00632R.TW)" will conduct reverse split operations, which is the first ETF reverse split case in Taiwan. According to data from the Taiwan Central Insurance Clearing House, as of November 1, a total of 59,757 people held 00632R.TW. The stock exchange pointed out that Yuanta 00632R.TW passed the reverse split case at the beneficiary meeting on October 17 and applied to the stock exchange for processing on November 5.
In response to the reverse split operation, the original beneficiary certificates will be finalized for credit transactions on November 28, market trading will be stopped from December 4 to December 10, and changes to the beneficiary list will be stopped from December 6 to December 10 record. December 11 will be used as the base date for the replacement of new beneficiary certificates, the trading start date for new beneficiary certificates, and the termination date for old beneficiary certificates.
What is reverse stock split? Let's start with "stock split"
According to the explanation on the stock exchange website, a stock split means "dividing one share into multiple shares." After the split, the net value of the stock decreases, but the total asset value remains unchanged. Assume that there are 10 original shares with a total value of 1,000 yuan. After the stock split, each share is divided into 2 shares, and the total number of shares becomes 20. However, the total value remains unchanged, which means that the original 100 yuan per share has become 50 yuan per share, the unit value of each share will be reduced. The advantage of a stock split is that it allows more people to buy the stock at a lower price and become small shareholders of the company.
"Reverse Stock Split" is the opposite operation method of stock split, that is, "merging multiple shares into one share". The stock price after the reverse split will increase. Similarly, taking the original 10 shares with a total value of 1,000 yuan as an example, after reverse split, every 2 shares will be merged into 1 share, and the total number of shares will become 5 shares. Since the total value remains unchanged, the original price of 100 yuan per share becomes 200 yuan per share, and the unit value of each share increases.
00632R.TW Why reverse split? What are the benefits of reverse split?
Since its issuance, Yuanta 00632R.TW's stock price has been falling. The issue price at the time of establishment was 20 yuan, and the current stock price has dropped to about 3 yuan. 00632R.TW is a futures trust ETF. According to the ETF delisting regulations, "the average unit net asset value (NAV) of the futures trust ETF in the last 30 business days has accumulated a decline of 90% compared with its initial unit net asset value; or the average size is lower than the termination The current threshold for futures ETF termination is 50 million yuan, and the trust contract must be terminated."
If the reverse split mechanism is implemented, liquidation and delisting can be avoided. The stock exchange stated that the reverse split ratio of the number of units of 00632R.TW beneficiary certificates is 0.14285714, that is, if investors originally held 7 shares, they will be exchanged for holding 1 share after the reverse split.
In addition to avoiding the risk of delisting, when the net value per share of an ETF is too low, it is easily manipulated by interested parties, leading to problems such as lack of investor confidence.
In addition, through the reverse split mechanism, the market price of ETFs can accurately reflect the fluctuations in net asset value and increase the liquidity of ETFs. According to Taiwan's current ETF trading system, a single increase or decrease unit when the ETF market price is less than 50 yuan is 0.01 yuan. Therefore, when the fund market price is 20 yuan, the increase or decrease caused by each increase or decrease unit is 0.05% (= 0.01/20) ; When the market price of the fund is 2 yuan, the increase or decrease caused by each unit of increase or decrease is 0.50% (=0.01/2). Therefore, when the market price of ETF is low, the price difference between the rise and fall of each rising unit and the purchase and sale will be large, which cannot accurately reflect the fluctuation of net asset value.
Moreover, the transaction fees for Taiwan stocks are the same, so whether investors trade an ETF with a stock price of 2 yuan or 14 yuan, the transaction costs required are the same. Therefore, after the reverse split of ETFs with too low net worth, investors' transaction costs can be reduced.
Source: Taiwan Stock Exchange Corporation, Taiwan Depository & Clearing Corporation
