Did you lose a large amount of money on your investment with the exchange-traded fund (ETF) United States Oil Fund, LP (USO)? Do your losses on this fund add up to $250,000 or more?
We’re investigating whether certain statements made by USO in its March 2020 registration statement might have been false or misleading, giving investors a false image of the company’s plans or condition.
USO was issued in April 2006 by the United States Commodity Fund (USCF). It was intended to give investment results corresponding to the movements of West Texas Intermediate (WTI) light, sweet crude oil. It is intended for short-term investors who closely monitor their investments and are bullish on short-term WTI crude oil futures contracts.
The fund’s benchmark is the WTI crude oil futures contract traded on the New York Mercantile Exchange. Futures contracts have expiration dates, and USO does not want to take actual delivery of any oil, so USO must roll its front-month futures contracts over to contracts expiring the following month. For example, contracts that expire in January must eventually be rolled over to purchase contracts that expire in February.
USO’s registration statement issued on March 23, 2020 said, “USCF does not anticipate letting USO’s Oil Futures Contracts expire and taking delivery of the underlying commodity. Instead, USCF will close existing positions, e.g., when it changes the Benchmark Oil Futures Contracts or Other Oil-Related Investments or it otherwise determines it would be appropriate to do so and reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments. Positions may also be closed out to meet orders for Redemption Baskets and in such case proceeds for such baskets will not be reinvested.”
In April 2020, due to the Covid-19 pandemic, oil prices collapsed.
On April 20, the price of the May contract for WTI crude closed at -$37.63 per barrel, a single-day falloff 300%, an enormous disruption of the oil market.
An article at the Investopedia website says that “the price of USO dropped more than 30% to just above $2 per share and new trades were halted as the fund’s managers began making structural changes in efforts to avoid a complete collapse.”
On April 22, USCF, the issuer of the USO Fund, announced a one-for-eight reverse stock split. In other words, every eight shares of USO stock would become equal to one share of stock, with the price of the new share being eight times the value of one of the old shares. The reverse split and new share price would take place after the close of trading on April 28 and be effective for trading on April 29, 2020.
Such reverse splits are often considered a sign that a security is in distress.
We’re investigating to see if a securities class action is appropriate.
If you lost a large amount of money on investments in the USO Fund, fill out the form on this page. We’d like to know what your experience was.
Article Type: InvestigationTopic: Securities