Posts for Ticker ‘BHH’

More Reverse Splits, or Just Closure, Possible or Needed in ETFs (FAS, FAZ, UYG, BAC, BHH, ARBA, IIH, AKAM, VRSN, UNG, USO, GLD, SDS, SPY, NYX, NDAQ)

Money Stack ImageWe have been large fans of exchange-traded funds, exchange-traded notes, and other exchange-traded instruments which are open for trade throughout the day that are allowed to be invested in just like a stock.  But with all new and growing markets, there are risks that need to be kept in check.  There are some leveraged ETF’s and their inverse counterparts which might need to see reverse share splits in the near future.  The notion of so many low-priced shares being so active may wreak havoc as the funds managing each ETF try to keep up with appropriate derivatives and in buying and selling shares of the components that are supposed to be the underlying securities.  There are even a few ETF’s which should probably just be closed down entirely and liquidated to holders.  Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and The Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) are both prime examples of ETFs which skew total daily exchange trading volume numbers because of low share prices today and massive trading volume.  This is not meant to pick on the fund groups because they created trading vehicles which they did not expect to see some of these moves.  There are many more ETFs and ETNs to consider here.

Direxion just announced a reverse split for another ETF yesterday, but not its two financial triple-leverage ETFs.  Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is now back down close to $8.00 per share, yet it trades 250 million shares on an average day.  The Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) is barely above $5.00 and trades more than 200 million shares on an average day.  So between the FAS and FAZ, you have an average of more than 450 million shares, and at today’s prices that is close to $3 billion worth of nominal value.

This review discusses a portion of the ETFs and ETNs and the ones under discussion today, along with underlying key companies, are Ultra Financials ProShares (NYSE: UYG), Bank of America Corporation (NYSE: BAC), B2B Internet HOLDRs (AMEX: BHH), Ariba, Inc. (NASDAQ: ARBA), Internet Capital Group (NASDAQ: ICGE), Internet Infrastructure HOLDRs (AMEX: IIH), VeriSign Inc. (NASDAQ: VRSN), Akamai Technologies Inc. (NASDAQ: AKAM), United States Natural Gas (NYSE: UNG), United States Oil (NYSE: USO), SPDR Gold Shares (NYSE: GLD), UltraShort S&P500 ProShares (NYSE: SDS), SPDRs (NYSE: SPY), New York Stock Exchange (NYSE: NYX) and the NASDAQ OMX Group Inc. (NASDAQ: NDAQ).
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Posted on: June 23, 2009 – 12:42 pm in Banking, Commodities, ETF, Index, Oil & Gas, Trading Alert, , , , , , , , , , , , , , , ,

How The CheckFree Buyout Killed An ETF (FISV, CKFR, BHH, MER)

Fiserv’s (NASDAQ:FISV) proposed cash buyout of CheckFree (NASDAQ:CKFR) for some $4.2 Billion, did at least make some CheckFree shareholders whole again.  The $48.00 cash buyout price is actually a ‘takeunder’ if you purchased CheckFree stock during much of 2006, but it makes everyone whole who purchased shares over the last year.  You can analyze the merger all you want and decide the closing times and percentages of the deal closing, but this is actually going to all but kill an exchange traded fund.

Enter the B2B HOLDRs (AMEX:BHH).  HOLDRs were some of the original exchange traded funds, or ETF’s, on the market.  This particular ETF launch was a product of the dot.com craze, and by the name "B2B" you can guess that many of the old components or would-be target components have died or been delisted.  HOLDRs can differ from many ETF’s in that the basket of stocks may not change as much as other ETF’s that track either a sector a stated index, and these were originally designed to where they could be unbundled into individual shares.  Unfortunately, you also receive all the underlying shareholder materials as if you were buying each underlying company. 

The B2B HOLDRs has had enough companies that would have fit the description go by the wayside, that it now only has four components that will ultimately become three components if no changes are made.  This ETF should now actually be called the CKFR HOLDRs.  According to the Merrill Lynch (NYSE:MER) website for HOLDRs (this one in particular) this one actually has 81% of its current weighting in CheckFree shares.  As noted, most of the old B2B pure-play stocks have gone and retired.  The actual underlying stocks didn’t start out this dominated if you look at the prospectus, but you will see on page 16 and 17 of the prospectus that the component count is low any way.

The B2B HOLDRs has only traded in a $1.81 to $2.46 range and it quite frequently trades fewer than 50,000 shares in a day.  If an ETF ever needed to be retired, the B2B HOLDRs is it.

Jon C. Ogg
August 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: August 8, 2007 – 11:01 am in ETF, Index, Mergers and Buy Outs, , , , , , ,