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Due to an extreme adverse move in oil futures relative to the futures’ closing price for Tuesday April 21st 2020, the swap underlying the WisdomTree WTI Crude Oil 3x Daily Short (“3OIS”) exchange-traded product (the “ETP”) was terminated early Wednesday morning 22nd of April 2020, before the open of European **************s.
This termination is in accordance with “Severe Overnight Gap Event” provisions set out in the prospectus for the products (page 182). In a “Severe Overnight Gap Event” the swap provider may terminate the swap agreement by issuing an official termination notice.
The purpose of these provisions is to allow the swap provider to terminate the swap before it reaches or breaches a floor of $0, where the product bears no value for investors.
Consequently, the product mentioned above, which relied on the swap will be terminated as per the timelines referred to above and below through a process of compulsory redemption. Payment is expected to be made on or around Tuesday 28th April 2020.
The final NAV which will be paid, and the relevant returns for the product from the previous day are provided below:
Product Name
Termination Value
Final NAV per Share in US Dollars (USD)
Return
from the NAV of Tuesday 21st April
to the Final NAV per Share
WisdomTree WTI Crude Oil 3x Daily Short (“3OIS”)
8.1854041
-59.29%
Trading of the ETP on European exchanges is suspended and will remain suspended until the ETP is closed.
Thanks Spope. So not a total loss, but I fail to see how that was triggered.
I imagine this is related to the overnight change in oil price, but as this materially didn't affect them I'm inclined to agree with you. With them undertaking compulsory buyback this means anyone who purchased yesterday is naturally getting screwed?
I don't get how it was triggered either. Doesn't make sense.
I bought yesterday so was completely screwed by them.
They are presumably hoping to get out paying people who used the opportunity of falling prices to make money. Odd how they wouldn't even sniff if it were the other way around... I'm interested to know if there's any recourse on this.
Could someone please explain the following:
In this morning's edition of the "Final Terms" document for 3SOI at www.wisdomtree.eu the figure quoted for the issue price (#8) was USD 8.7393691 for 225,000 securities. But in this afternoon's "Final Terms" document (but already dated tomorrow 23rd April, at #7), the issue price (#8) is now USD 20.1079477 for 45,000 securities.
That's quite an adjustment between two editions of the "Final Terms" produced after the product has been suspended. Does anyone here know what is going on behind this data?
The 'link removed' was, of course, the Wisdomtree european website.
I notice that a 59.29% drop from the newly stated 20.1079477 figure takes the value down to very near the 8.1854041 figure of the legal announcement. But what is behind the sudden 80% drop in the number of securities being referenced?
My thoughts, to be taken with a pinch of salt...
The issue date (#8) is the payment date, hence it is tomorrow and not that the document is 'dated' tomorrow as the overall document is dates today. I also believe the issue price of $20ish may be for a lesser number of securities, perhaps those made in the last day - though this would be at a premium to the $16ish close. Looking on londonstockexchange there was ~1m of value traded on 21/04/20 which divided by $20.1 gets in the region of 45,000 - the 1m is heavily rounded by the looks of it
I'm sure someone more clued in than myself will tear this to shreds and maybe the $20 is wishful thinking....
Still confused, in that case, why the new document replaces the old one rather than sitting alongside it, but thanks very much for this hopeful theory which does make a lot of sense. That would mean that those who bought near the peak yesterday could still at least get their money back rather than just half of it. A report on this forced redemption over at FT Alphaville points out that 3SOI was overcollateralised with about £525M in stocks. So surely Wisdomtree should be able to ensure at least a 100% refund for everyone left holding the securities. Let's hope so ....
I notice that the "Value Traded - Daily" graph at the LSE website says 301M GBX were traded on 21st April. So perhaps the 45,000 only refers to those securities bought towards the end of the day.
That's 3SOI as opposed to 3OIS which the documentation I've seen is talking about - appreciate this is the 3SOI thread however. Another thing to add to the confusion...
3SOI and 3OIS point to the same ISIN IE00B7SX5Y86, so one and the same product.
Ah fair enough they are the same just USD v GBP. Further notices on the WisdomTree website (https://www.wisdomtree.eu/en-gb/about-wisdomtree/important-notices) suggest my theory as being nonsense but as stated I was more being hopeful.
I can't help feeling royally screwed over by this and wondering what can be done. Seemingly arbitrary times/dates picked for their chosen price, even though selling into Wednesday morning would have realised a further increase for those of who are invested in them.
www.wisdomtree.eu/en-gb/ about-wisdomtree/important-notices (link attempt 2-just remove the spaces)