MacroShares $100 Oil Up (UOY) and MacroShares $100 Oil Down (DOY) began trading at their new 4:1 split-adjusted prices on Friday. UOY closed on Friday at $3.50 instead of a pre-split price of $14.00, and DOY closed at $8.40 versus a pre-split price of $33.80.
There was absolutely no reason to split these shares.
The official press release from Macro Securities Depositor, LLC states, “this split will make MACROShares Oil Up and Down more accessible to investors. It is anticipated that this will increase liquidity to the market for UOY and DOY, while maintaining the relationship to the price performance of the NYMEX light sweet crude oil futures contract (crude oil).”
Someone at MacroShares is receiving bad advice. This share split does not make these ETFs more accessible to investors. Anyone who could not afford the $14 pre-split price has no business buying them at $3.50.
The cold fact is this split makes these ETFs less accessible to investors. First, the 4:1 split was not accompanied by a 4:1 reduction in the bid/ask spread. Second, the increased quantity of shares required for a given dollar allocation significantly increases transaction costs for anyone who pays per-share commissions.
RevenueShares tried this trick back in October for two of their ETFs. At the time, we predicted the stunt would fail, and would likely produce the opposite effect. The volume for RevenueShares Mid Cap (RWK) and RevenueShares Small Cap (RWJ) has dropped considerably and both are now on ETF Deathwatch.
MacroShares may indeed see increased volume, but it is likely to be fleeting as traders close out their positions and move to better designed vehicles. Look for them in a future issue of ETF Deathwatch.