IBB tracks the Nasdaq Biotechnology Index and holds almost 160 stocks. The ETF is cap-weighted, meaning it features significant allocations to the largest biotechnology companies.
For example, Biogen Inc BIIB, Amgen, Inc. AMGN and Gilead Sciences, Inc. GILD combine for 24 percent of the IBB ETF’s weight. Regeneron Pharmaceuticals Inc. REGN and Celgene Corporation CELG combine for 13.6 percent of IBB’s weight. Overall, IBB’s top 10 holdings combine for about over 50% of the fund’s weight. That’s a lot.
Today, shares appear to be cratering 66%, and the board is lit up with fear and anxiety. Well, folks, relax. Those who follow the IBB ETF are laughing, because the decline is imaginary. What do we mean?
The only reason it is down, (and its really NOT), is because of a stock split. The board approved a 3-for-1 split for the IBB fund for shareholders of record as of the close of business on November 28, 2017, payable after the close of trading on November 30, 2017. By definition, a 3-for-1 split lowers the share price and increases the number of outstanding shares.
The key? The total value of shares outstanding is not affected by a split. So if you think the ETF dropped by 66% out of the blue, we have a few bridges for sale.
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