Direxion to Execute Reverse Split of South Korea Bull 3X ETF

Direxion, a prominent provider of leveraged and inverse exchange-traded funds (ETFs), has announced a significant change to one of its products. The company will execute a 1-for-10 reverse split of its Direxion Daily MSCI South Korea Bull 3X Shares (KORU) ETF, effective after market close on February 7, 2025.

This reverse split will result in every ten shares of KORU being consolidated into one share, reducing the total number of outstanding shares by approximately 90%. While the overall market value of the fund will remain unchanged, the per-share net asset value (NAV) and market price will increase tenfold.

The move could have several implications for investors and the broader ETF market. For existing KORU shareholders, the reverse split may result in the creation of fractional shares, which cannot be traded on the NYSE Arca. These fractional shares will be redeemed for cash at the split-adjusted NAV, potentially triggering tax consequences for affected investors.

Additionally, the higher share price resulting from the reverse split could alter the ETF's trading dynamics. A more expensive share price might deter some retail investors while potentially attracting institutional investors who prefer higher-priced securities. The reduced number of outstanding shares could also impact liquidity and trading volumes in the short term.

The reverse split reflects broader trends in the ETF industry, where fund managers occasionally adjust share structures to maintain optimal pricing and tradability. For Direxion, this move may be aimed at improving the marketability of KORU, which provides leveraged exposure to the South Korean equity market.

Investors should note that while the reverse split does not directly affect the fund's investment strategy or exposure, leveraged ETFs like KORU carry significant risks and are designed for sophisticated investors engaging in short-term trading. The complex nature of these products, combined with the structural changes from the reverse split, underscores the importance of thorough due diligence for anyone considering an investment in KORU or similar leveraged ETFs.

As the ETF landscape continues to evolve, moves like this reverse split highlight the ongoing efforts of fund providers to fine-tune their offerings in response to market conditions and investor preferences. Market participants will be watching closely to see how this change affects KORU's performance and investor interest in the leveraged South Korea ETF space.