ETL Liquidation and Price of the Security
If an ETL debates liquidating its fund, meaning its board says yes but the shareholders must still vote, and the ETF's price reflects the underlying value of the securities that it holds, what would cause the ETF to rise in value while the securities that it holds are not rising in value?
For an example, if an ETF chooses to liquidate its fund, and investors don't sell the ETF - in theory - they will receive the funds of the ETF as measured by the underlying price of the securities that it holds, such as the SPY ETF liquidating would still reflect the current value of the S&P 500 if it liquidated. Yet, using that theoretical SPY liquidation (not happening at all), if the SPY announced this, and it rose 10% while the S&P 500 did not, that seems to imply that the SPY ETF's price does not reflect the underlying securities.
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what would cause the ETF to rise in value while the securities that it
holds are not rising in value?
If there are more buyers than sellers, that could cause the price to go up as a way to attract sellers. At the same time, if the difference is there then some may use the Creation/Redemption mechanism to create/redeem existing shares. Thus, if the price of the ETF is greater than the underlying securities' price then there are participants that will buy the underlying securities and exchange them for the ETF and then sell the ETF shares for a quick profit. Of course it is worth noting that one has to know what is the underlying set of securities that can be exchanged in-kind.
If you look at quotes, there will often be a difference between what an ETF last traded at and what the underlying securities are worth. These differences generally get minimized by authorized participants either creating new shares or redeeming existing shares to take advantage of the spread that exists which is why I have the comment above and this answer.
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