Key Takeaways:
- GraniteShares 2x Long LCID ETF closed out its Lucid position at a loss
- The fund's net asset value fell below zero, triggering Nasdaq delisting
- The collapse highlights catastrophic risks of leveraged single-stock ETFs
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GraniteShares 2x Long LCID ETF collapses to negative NAV, faces delisting
The GraniteShares 2x Long LCID Daily ETF closed out its entire Lucid Group Inc. position at a loss, pushing its net asset value below zero and triggering a delisting from Nasdaq.
"Following market movements in Lucid Group Inc., the fund closed out its entire LCID position today at a loss that caused its net asset value to become negative," GraniteShares Advisors LLC said in a statement. The firm said it will initiate the delisting of the fund from the Nasdaq Stock Market.
The GraniteShares 2x Long LCID Daily ETF (Nasdaq: LCDL) sought to deliver twice the daily return of Lucid shares, a strategy that requires daily rebalancing and amplifies both gains and losses. The fund's complete liquidation of its LCID position resulted in a net asset value below zero — effectively wiping out all shareholder equity. GraniteShares did not disclose the exact dollar amount of the loss or the fund's final NAV.
The collapse marks one of the most severe outcomes possible for a leveraged single-stock ETF, a product category that regulators and industry critics have warned carries risks beyond those of traditional ETFs. Because leveraged funds rebalance daily, sustained volatility in the underlying stock can cause the fund to lose value even if the stock trades sideways over time. In this case, a sharp adverse move in Lucid shares forced the fund to exit at a loss exceeding its remaining assets.
The delisting leaves LCDL shareholders with no recovery path, as a negative NAV means the fund's liabilities exceeded its assets at the time of liquidation. GraniteShares said shares may be sold during trading hours through any brokerage account before the delisting takes effect. The firm did not provide a specific delisting date.
The implosion of a 2x leveraged single-stock ETF underscores the catastrophic risk embedded in these products when the underlying stock experiences extreme volatility. Investors holding leveraged ETFs overnight face compounding risk that can erode principal rapidly, and a single day's adverse move can result in a total loss. The event is likely to draw renewed scrutiny from regulators on single-stock leveraged ETFs, a product class that has grown in popularity despite warnings from industry professionals.
This article is for informational purposes only and does not constitute investment advice.
