Perhaps a hot take, but worth a discussion: I propose that reverse splits should be viewed as “routine maintenance” for ultra high yield funds (50%+ yield).

For those following along with recent YieldMax X Spaces, they are seeking community feedback about reverse splits: hence this thread.

Some community members are actually begging them to do it (even though YM said they never would unless for compliance reasons).

I decided to write up this article to help educate and fix some misconceptions about what a reverse split is (vs penny stocks). I also analyzed the historic performance analysis of TSLY when it did a R/S in 2024.

Spoiler alert: Performance outcomes didn't change and a reverse split is 99% "cosmetic", but it comes with some extra good benefits:

* No impact to income or DRIP rates
*  Better options chains for hedging/CSP
*  Margin requirements are eased

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What's your opinion? Would you care if YieldMax, Graniteshares, Roundhill or others used reverse splits in a strategic manner?

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EDIT: I wanted to address the elephant in the room too: Logically, one would assume that if an ETF has “good performance”, it should never need to reverse split. And therefore, a reverse split indicates poor performance or a flawed investment product.

I think that's normally true, but a little different for high yield ETFs:

* Performance isn't measured on NAV, rather total return (ex. if CONY reverse split tomorrow, it would have 133% total return since inception, but would now have a double-digit share price.

* With 50%+ distribution rates, plus the capped upside of a covered call strategy, NAV will naturally decline, especially over 2-3 years. It's essentially baked into the operational mechanics (and you would need the underlying asset to continually achieve yearly gains of 100%+ to offset it, which is rare and unrealistic).

* It's kinda like UVXY -> based on how that ETF is built and the purpose of it, reverse splits are inevitable -- but investors can still make money trading it.

Why Reverse Splits Are Good for High Yield ETFs