Frequently Asked Questions

How does a reverse split work for an ETP?

A reverse split generally works the same way for an ETP that it does for an individual equity. The issuer divides the current number of ETP shares outstanding by some amount (usually 5 or 10), which has the simultaneous effect of increasing the ETP's price per share. All current shareholders (as of the close of the trading day) will be impacted, and investors who own a nondivisible quantity of shares will receive a cash payment for the partial units.

Consider the following example. An ETP that currently trades at $20/share and with 100 million shares outstanding decides to undergo a 1-for-5 reverse split. The reverse split would reduce the number of shares to:

100 million shares / 5 = 20 million shares

While simultaneously increasing the price per share to:

$20/share x 5 = $100/share

Note that, just as with equities, an ETP reverse split does not affect the underlying value of the ETP or its issuer. In our example, the market capitalization of the ETP before and after the reverse split is the same at $2 billion.

Often, reverse splits are undertaken to meet certain exchange listing requirements to maintain a certain threshold price, or to keep the ETP trading within a convenient trading range. Reverse splits can have the added benefit of reducing investor trading costs. After a reverse split, ETP investors must pay less in commissions to acquire the same notional exposure, since now they need to buy or sell fewer shares.


Investments in ETPs involve risk, including the possible loss of principal, and are not appropriate for all investors. Non-traditional ETPs, including leveraged and inverse ETPs, pose additional risks and can result in magnified gains or losses in an investment. Specific risks are outlined in the fund prospectus and may include concentration risk, correlation risk, counterparty risk, credit risk, market risk, interest rate risk, volatility risk, tracking error risk, among others. Investors should consult with their tax advisors to determine how the profit and loss on any particular investment strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations. The information in this program is provided for general education and information purposes only. No statement within this program should be construed as a recommendation to buy or sell a security or to provide investment advice.