By the end of this month, the CoreShares Green ETF (CGREEN) will delist from the JSE. While billed as an environmentally-friendly ETF, the product’s resource constituents didn’t convince many investors.
CoreShares announced the delisting of the ETF on Monday, citing two reasons for its decision. Firstly, Nedbank Capital, who designed the index to begin with, will no longer maintain the index on behalf of CoreShares. Secondly, the ETF “has not received the commercial support initially anticipated.”
This might sound scary for holders of the ETF, but unlike the delisting of an individual company, delisting of ETFs have a relatively small impact. By 23 August, trade in the ETF will be suspended. Until then, you can sell the ETF like you normally would. Because the price of an ETF is determined by the share prices of its constituents, you will receive fair value for the share. That means the value of your ETF share is based on the value of the share price of the companies in which the ETF is invested, not supply and demand like ordinary shares.
If you decide to hold on to the ETF, the value of your shares plus the dividends due will be paid out to you by 28 August. Once again, the price is determined by the value of the underlying shares, not supply and demand, which means you will receive fair value for the shares. The cash will be paid into your brokerage account, which means you’ll have some money to spend on a new ETF.
The delisting could trigger capital gains tax, even though it wasn’t your choice to sell. If you hold this ETF in your tax-free account, you are in the green (so to speak). If you don’t, any amount of profit earned on the ETF over the R40 000 capital gains exemption will be liable for capital gains tax.
Click here to meet the Just One Lap team at one of our live, free events.