F squared investments was once a rising star in the ETF industry, known for its flagship alpha-seeking ETFs that aimed to beat the market. However, its journey came to an abrupt end in 2015 when SEC charged the firm with making false statements about its flagship ETFs’ performance track record. The stock price of F squared investments consequently suffered a huge crash. This article will examine the impressive growth but unfortunate downfall of F squared investments from the perspective of its stock price history.
F squared’s early years marked by rapid growth
Founded in 1993, F squared started out licensing its indexes to other ETF firms. It launched its first ETFs in 2009, quickly gaining popularity for alpha-seeking ETFs that claimed to beat benchmark indexes through active management. F squared’s assets under management soared from $50 million in 2008 to $28 billion by 2014, as investors piled into its promising ETFs. During this period of rapid growth, F squared’s stock price surged over 600% from around $5 in 2010 to a peak of nearly $35 in 2014.
SEC charges lead to collapse of F squared stock
F squared’s success story came to a dramatic end in December 2014, when SEC charged the firm with making false statements about its ETFs’ past performance. Specifically, SEC alleged that F squared misrepresented its flagship ETFs’ track record by claiming a much higher performance prior to the funds’ actual inception. This revelation caused F squared’s stock price to plunge nearly 80% overnight. The stock continued its freefall over the next few months, cratering from a peak of $35 to just $1 per share by October 2015. Massive investor redemptions forced F squared to liquidate its ETFs soon after.
Lasting reputational damage and acquisition
The SEC charges destroyed F squared’s reputation and credibility with investors. Despite paying $35 million to settle the charges in 2016, the firm failed to recover and faced declining assets under management. In April 2018, F squared was acquired by Merit Life for just $2.5 million – a fraction of the $35 million settlement amount. The deal led to F squared stock being delisted after over 15 years of trading on NASDAQ. While F squared still exists as a wholly-owned subsidiary, its story serves as a cautionary tale on the importance of transparency and regulatory compliance in the ETF industry.
Key lessons from the boom and bust of F squared
The dramatic rise and fall of F squared investments demonstrates the risks of rapid growth without proper controls. Its false performance marketing led to temporary success but eventual reputational ruin. For ETF providers, maintaining robust compliance and risk management is essential, even during growth phases. For investors, F squared shows that outsized returns can come with hidden risks, and due diligence beyond marketing claims is vital. Overall, F squared’s stock price history traces the ambitious but precarious arc of a firm that flew too close to the sun.
In summary, F squared investments experienced massive growth as an ETF provider before revelations of misstatements torpedoed its stock price and led to asset bleed, regulatory penalties, and eventual acquisition by a competitor at a major discount.