More than $241 million of structured notes tied to Apple face losses after a 27 percent drop in the stock of the world’s most valuable company eroded built-in cushions that protect investors.
Banks issued 76 U.S. notes linked to Apple stock during the seven weeks starting Aug. 20 when the company was valued at $650 a share or more. Sixty- three percent of the securities absorb as much as 20 percent of stock price declines before investors are at risk of losing principal or coupon payments.
Banks issued $1.66 billion of notes in the U.S. tied to Cupertino, California-based Apple this year, almost three times as many as the year-earlier period, making it the most popular underlying company. Many of the securities are so-called reverse convertibles, notes that pay a high coupon while risking large losses if the share price plummets.
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