Friday, November 11, 2016

iShares REM: Reverse Split

I was surprised today to see that my Rem shares are now worth more than $40 (US). The last time I looked those shares could be bought for something in the neighbourhood of $10 (US). Why the jump? A reverse split.

A reverse split of 1-for-4 took effect before the market opened this past November 7, 2016. Each REM share was converted to one quarter of a (New) share in the popular iShares Mortgage Real Estate Capped ETF. In other words, if you owned 800 old shares, you only own 200 new shares today.

Why the reverse split? I have no idea but with the new president-elect Donald Trump led government in the States, an increase in interest rates may be in the offing. If so, an ETF like REM, with its high 13%-plus dividend yield, will come under downward pressure. The new value gives REM room to fall. (No matter who was elected, rates will go up at some point in the future. Of that, there is no doubt.)

If REM rallies next week, I may sell. When the dust settles, after the inauguration in early 2017, I may buy back in if the price is right.

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