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GraniteShares

Education

Corporate Actions

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Corporate actions such as dividends or right issues do not affect the value of an investor’s investment.

For instance, after a stock goes ex-dividend, an investor holds the stock and a dividend with a combined value equal to the share price before it went ex-dividend.

Similarly, an investor who wants to short a stock needs to borrow it first. If the stock pays a dividend, the borrower needs to compensate the lender for the amount of the dividend, so that the value owed to the lender before and after the stock went ex-dividend remains the same.

Leveraged ETP Securities are priced off indices that take into account corporate actions such as dividends or right issues so that there is no impact on the index level when a stock goes ex-dividend or ex-rights (potentially subject to tax).

Example 1

Closing Day 1

Company A share price                                             $10.00

Index 3x Short Daily Company A Index                  100.00 points

Value ETP tracking the Index                                   $5.00

Opening Day 2 (assuming no market movements)

Company A goes ex-dividend                                  $1.00

Company A share price                                             $9.00

Index 3x Short Daily Company A Index                  100.00 points

Value ETP tracking the index (before fees)           $5.00

There was no news impacting the share value in Company A. The only reason it’s share price went down was because it started to trade ex-dividend.

The index cancelled the impact of the dividend and remained at the same level. Similarly, the value per ETP before fees remained constant.

Example 2

Closing Day 1

Company A share price                                             $10.00

Index 3x Short Daily Company A Index                  100.00 points

Value ETP tracking the Index                                   $5.00

Opening Day 2 (assuming no market movements)

Company A goes ex-rights                                        $3.00

Company A share price                                             $7.00

Index 3x Short Daily Company A Index                  100.00 points

Value ETP tracking the index (before fees)           $5.00

There was no news impacting the share value in Company A. The only reason its share price went down was because it started to trade ex-rights.

The index cancelled the impact of the rights and remained at the same level. Similarly, the value per ETP before fees remained constant.

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