U.S. Natural Gas to Undergo 4-For-1 Reverse Split
The controversial U.S. Natural Gas Fund (NYSE: UNG), which has lost about 57% of its value in the past year, will execute a four-for-one reverse unit split after the market close on February 21. The split will take effect for unit holders on February 22.
As a result of the reverse unit split, unit holders on February 21, 2012 will receive one post-split unit of USNG for every four pre-split units of USNG they hold, according to U.S. Commodities Funds, UNG's issuer. The split will result in a reduction of the number of UNG shares outstanding and a corresponding increase in the ETF's net asset value.
As of February 1, UNG had almost 162.1 million shares outstanding with $821.5 million in assets under management. Amid record production and plunging natural gas prices, UNG has been in a downward spiral for over a year. The ETF flirted with $13 in June before falling below $5 earlier this year.
ETFs such as UNG and the U.S. Oil Fund (NYSE: USO) have been criticized for their high expenses and poor returns even when the commodities they track rise. Those high fees and slack returns are the result of the funds' rolling process that requires new futures contracts to be purchased every month. UNG's Web site lists a total expense ratio of 0.97%.
Despite all the controversy, UNG remains heavily traded and is thought to be a favorite tool of hedge funds and other professional traders. The ETF has average daily volume of 16.6 million shares over the past three months, according to Yahoo Finance.
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