"91% Asset Plunge" of an ETF, How Exactly Does It Work?

[Cyrix]

There is a Bloomberg story about how "LDEM lost more than $730 million (91%) in assets in two days" (Dec 21 to Dec 23)
https://www.bloomberg.com/news/arti...hits-a-blackrock-etf-of-sustainable-em-stocks

However, the volume in those two days were less than 30k.

Can anyone explain to me

1. How (mechanically) this $730 million outflow happened when there was only 30k volume?
2. Why did the ETF rise significantly rather than falling in those two days, opposite to the supply/demand forces?

Thanks.

 

[ph1l]

ETF shares can be redeemed for the underlying assets.
https://www.investopedia.com/articles/mutualfund/05/062705.asp

Redeeming an ETF
When investors want to sell their ETF holdings, they can do so by one of two methods:

• The first is to sell the shares on the open market. This is generally the option chosen by most individual investors.
• The second is to gather enough shares of the ETF to form a creation unit, then exchange the creation unit for the underlying securities. This option is generally only available to institutional investors due to the large number of shares required to form a creation unit. When these investors redeem their shares, the creation unit is destroyed, and the securities are turned over to the redeemer. The beauty of this option is in its tax implications for the portfolio.

 

[smallfil]

There is a Bloomberg story about how "LDEM lost more than $730 million (91%) in assets in two days" (Dec 21 to Dec 23)
https://www.bloomberg.com/news/arti...hits-a-blackrock-etf-of-sustainable-em-stocks

However, the volume in those two days were less than 30k.

View attachment 277821

Can anyone explain to me

1. How (mechanically) this $730 million outflow happened when there was only 30k volume?
2. Why did the ETF rise significantly rather than falling in those two days, opposite to the supply/demand forces?

Thanks.

This was a redemption from a major investor in the fund. Looked at the stockchart and do not see the share price plunging down 91%. The article was misleading. It should have stated that a majority investor took out their monies reducing investments in the fund to 9%. That is what actually, happened.

 

[BKR88]

How (mechanically) this $730 million outflow happened when there was only 30k volume?

Blackrock would have done that one large transaction privately so the volume never occurred on an exchange.

Why did the ETF rise significantly rather than falling in those two days, opposite to the supply/demand forces?

The $730 million would have been divided between all the stocks in the ETF which isn't large enough to affect the entire group of stocks.

 

[RedSun]

This is how ARKK share owners can demand individual company shares in exchange for ARKK shares. Then Cathie Wood would have less capital to manage.

Like a reverse stock buy back. Outside funds can "sell back" shares to Cathie Wood for TSLA shares etc....

 

[SunTrader]

So again how can an ETF lose 91% of its assets .... back in December and still be trading right around the same price currently?

 

[newwurldmn]

This is how ARKK share owners can demand individual company shares in exchange for ARKK shares. Then Cathie Wood would have less capital to manage.

Like a reverse stock buy back. Outside funds can "sell back" shares to Cathie Wood for TSLA shares etc....

I don’t think they can do it with arrk. I think arrk is actually a closed end fund which is like a mutual fund that trades on the open market. You can’t create/redeem it for the underlying basket

 

[TrailerParkTed]

So again how can an ETF lose 91% of its assets .... back in December and still be trading right around the same price currently?

Ilmarinen privately got BLK to redeem their $600 million investment.

 

[Cyrix]

Thanks everyone for the explanation.

 

[murray t turtle]

There is a Bloomberg story about how "LDEM lost more than $730 million (91%) in assets in two days" (Dec 21 to Dec 23)
https://www.bloomberg.com/news/arti...hits-a-blackrock-etf-of-sustainable-em-stocks

However, the volume in those two days were less than 30k.

View attachment 277821

Can anyone explain to me

1. How (mechanically) this $730 million outflow happened when there was only 30k volume?
2. Why did the ETF rise significantly rather than falling in those two days, opposite to the supply/demand forces?

Thanks.

%%
Good subject for a book.
Hitting some of the high points;
[1]Black Rock tried window dressing negative meddling in gun maker business, not good for BR, but guns + ammo makers is a complex markets/ so that life.
So really few guns + ammo buyers care about BR window dressing
[2]Same principal, one home can sell or buy price all over the map\low volume.So most RE appraisers us 3 comparisons , my RE agenten used a whole page or 2 ;50 sales.
{2.777} I made money on black rock's DVY, but average volume then was closer to 777 average day. But i remember a price shock /good thing my plan forbids panic selling + i had my 10 year paper charts. Like IBD founder notes ,''NEVER buy for dividend'' Amen
Sometimes dividends may smooth out price shocks, but certainly not all the time LOL]