Stock splits really shouldn’t matter to investors. The value of your investment doesn’t change, only the number of shares that you’re holding does. However, it’s still a move that can drum up some news around a business. And stock splits are positive since they suggest a stock has been doing well and its value is high enough where doing a split is justifiable.
Reverse splits, however, mean the opposite. It’s management’s effort to boost the price. Normally you might see it for struggling stocks that are down big and that may need to keep their values above $1 in order to stay on a major exchange. But last month, it was an exchange-traded fund (ETF) that announced a reverse stock split.
Global X Cannabis ETF (NASDAQ:POTX) said that after the close of the markets on June 10, it will reverse split on a 1-for-6 basis. Last week, the fund closed at a value of $3.28. This is a rare move for an ETF to make, and it’s a bit unclear what management believes it will accomplish. The fund holds many popular cannabis stocks, including Cronos Group (NASDAQ:CRON), Tilray Brands (NASDAQ:TLRY), and Sundial Growers (NASDAQ:SNDL).
Pot stocks have struggled mightily over the past year as Global X Cannabis has lost nearly 80% of its value during that time. The reverse split unfortunately accomplishes nothing for investors and there’s still significant risk with this fund as it holds many pot stocks that have been underperforming for some time now. The reverse split shouldn’t change your outlook for the fund.
