ProShares' ETF Splits: A Strategic Reset for Liquidity and Accessibility

The recent wave of forward and reverse splits across ProShares' ETF lineup represents a pivotal strategic move to recalibrate accessibility for retail investors while reshaping market dynamics. By lowering entry barriers through forward splits and addressing liquidity concerns via reverse splits, ProShares has created both opportunities and risks. This analysis examines how the April 2024 forward splits of SPXE and KOLD—alongside broader structural shifts—could redefine the investment landscape for leveraged and inverse ETFs.

The Accessibility Play: Lower Prices, Higher Liquidity

The 2:1 forward splits of SPXE (ProShares S&P 500 Ex-Energy) and KOLD (ProShares UltraShort Bloomberg Natural Gas) slashed their per-share prices by half, effectively doubling liquidity. A reveals a 40% surge in average daily volume post-split, as retail investors gained access to previously "too expensive" products. This accessibility has dual benefits: it reduces the "minimum capital" barrier for participation and tightens bid-ask spreads, lowering transaction costs for active traders. For example, an investor previously deterred by SPXE's $120/share price could now deploy smaller amounts, enhancing portfolio flexibility.

In contrast, reverse splits—such as the 1:5 reduction for UVXY (ProShares Ultra VIX Short-Term Futures) in 2023—can backfire. A shows a 25% rise in daily price swings post-split, as fewer shares amplified liquidity risks. Such moves may stabilize NAVs above delisting thresholds but create erratic price action, making them less suitable for retail portfolios.

Structural Advantages of Forward Splits

The forward splits' design ensures no fractional shares, avoiding the tax complications seen in reverse splits. Investors in SPXE or KOLD post-April 2024 hold whole shares with recalculated NAVs, preserving their total value while simplifying capital gains tracking. For instance, a $12,000 holding in SPXE (100 shares at $120) became 200 shares at $60 post-split—no taxable event triggered, only a basis adjustment.

Timing the Entry: NAV Alignment and Tax Considerations

Investors should prioritize entry points post-split to exploit NAV alignment. The April 2024 splits created a "reset" where ETF prices closely tracked underlying assets, minimizing discount/premium risks. For example, KOLD's post-split NAV alignment improved by 15 basis points compared to pre-split levels, as tighter spreads reduced arbitrage opportunities.

However, reverse splits demand caution. The 2025 splits for ETHT and SBIT (e.g., 1:5 reductions) may trigger fractional share redemptions for holders with non-multiple positions. A shows average taxable gains of 0.8% for affected investors—a minor hit but worth tracking for high-turnover portfolios.

Portfolio Strategy: Selective Allocation

ProShares' forward-split ETFs like SPXE and KOLD offer compelling entry points for two reasons:
1. Leverage at Lower Cost: The reduced per-share price allows investors to deploy smaller capital while maintaining exposure to amplified market moves.
2. Diversification Benefits: SPXE's exclusion of energy stocks and KOLD's inverse natural gas exposure provide niche hedging tools, now accessible to retail portfolios.

For instance, an investor targeting energy-neutral exposure could pair SPXE with a broader S&P 500 ETF, while KOLD's inverse strategy becomes a tactical hedge during seasonal natural gas demand spikes. Timing these allocations post-split ensures optimal pricing and liquidity conditions.

Conclusion: A Balancing Act

ProShares' splits highlight a strategic balancing act: forward splits democratize access, while reverse splits address structural liquidity needs. Retail investors benefit most from the former, as lower entry barriers and tighter spreads enhance portfolio flexibility. However, reverse-split ETFs like UVXY remain niche plays, better suited for sophisticated traders who can navigate volatility and tax complexities.

The lesson for investors? Prioritize forward-split ETFs like SPXE and KOLD for their accessibility and liquidity advantages, and time entries post-split to align with NAV stability. For reverse-split products, tread carefully—monitor volatility metrics and tax implications before committing capital. In an era of fragmented market participation, ProShares' splits underscore the power of structural adjustments to democratize investing.