PDD is stingy, why does KPDD pay a 58% dividend?

As we all know, PDD (Pinduoduo) is notoriously known as the "iron rooster" in the U.S. stock market.

The company has hundreds of billions of dollars in cash on its books, but it insists on not paying dividends or repurchasing shares, focusing solely on development, leaving shareholders teary-eyed.

But yesterday, something very intriguing was discovered: an ETF with the ticker KPDD announced a dividend of $6.65 per share.

Keep in mind, KPDD's stock price was just over $11 yesterday. In one fell swoop, it distributed half of its "net worth," with a staggering dividend yield of 58%.

Some group members were thrilled by this number: since the main stock PDD isn't paying out, wouldn't buying this KPDD be a huge win?

Where did this massive payout come from? Today, let's talk about this ETF.

1. Where did the money come from?

First, we need to understand what KPDD actually is.

KPDD stands for: KraneShares Daily 2x Long PDD Active ETF. It is not the PDD stock issued by Pinduoduo the company, but a derivative fund based on PDD stock.

Its goal is very simple and aggressive: to provide 2x the daily return of PDD's price movements—remember, this is its origin.

To achieve this, the fund manager doesn't simply buy and hold stocks but signs a "betting agreement" with an investment bank.

Simply put, it's a daily-settled gamble:

If PDD rises by $1, the bank owes the fund $2.

If PDD falls by $1, the fund owes the bank $2.

In 2025, Pinduoduo's stock price trended upward overall, with a few major rallies in between. The fund manager won quite a bit from the bank in this daily-settled gamble.

By year-end, the U.S. IRS has a hard rule: the "winnings" from such bets must be forcibly distributed to shareholders and cannot be carried over.

So, this so-called 58% "dividend" is essentially the fund forcibly liquidating the paper gains you made through leverage this year and distributing them to you.

2. "ATM" Withdrawal

Reading this, it might seem pretty great.
You might wonder, if you could buy KPDD before the announcement, wouldn't that be a huge win?

Wrong. There's no such free lunch in the world.

Because at the moment the market opens on the dividend day, KPDD's stock price will automatically drop by $6.65. That means:

1. Before the dividend: You hold $1800 worth of chips.

2. After the dividend: You hold $1135 worth of chips + $665 in cash.

Your total assets haven't increased by a single cent.

This is like withdrawing your own money from an ATM—"left hand to right hand"—you don't get richer just by withdrawing.

3. In fact, you might even lose

It might seem like you didn't lose, but you actually did, because this operation has a few obvious issues:

1. Forced taxation. This $665 in cash becomes "dividend income" in your hands. Any income is taxable. This money could have compounded if left in the stock price, but now it's forcibly taken out, and the IRS takes a cut. This is the biggest blow to compound interest.

2. Passive position reduction. If you're a firm bull and want to hold PDD at full position, this dividend forcibly turns part of your position into cash. If PDD surges next week, you'll have fewer chips and might miss out.

3. Hidden erosion. Even if PDD's stock price returns to its original level after a year (holding the main stock breaks even), KPDD's net value will keep shrinking due to the daily "chasing highs and selling lows" rebalancing mechanism. The longer the volatility, the greater the erosion.

4. Conclusion

After studying this derivative, the final conclusion is quite simple:

For long-term holding, you still need to buy the main stock.

All gifts from fate have their price secretly marked in advance.

Leveraged products are honey in the short term but often poison in the long run.

If you want to survive longer in this market, you need to 老老实实 buy the main stock.

Slow is fast.

$PDD(PDD.US)