Tesla downfall puts $157 million worth of structured products in Korea at risk

(Bloomberg) — Unprecedented drop in Tesla Inc stock. this year has put $157 million worth of related Korean structured products at risk of capital loss if the electric car giant’s stock doesn’t show a sharp recovery.

Most read by Bloomberg

This is the amount of principal that will be lost if Tesla shares fail to rise to at least $134.5 per share, about 20% above current levels, before these so-called auto calls are paid off, according to Bloomberg calculations based on based on data from the Korean Securities Depository.

The products were sold to Korean retail investors, who have remained loyal to Tesla despite a nearly 70 percent drop this year. Some were issued when Tesla was trading above $300 per share, meaning a bounce of 60% or more is required before the autocollabs reach maturity, usually within one or two years, or the principal will be forfeited.

Autocallables became popular among Korean citizens during the era of low interest rates, promising income higher than savings unless the underlying asset plummets. Many of these are based on stock benchmarks such as the Kospi 200 index, although products linked to Tesla and other major stocks, including Nvidia Corp. and Amazon.com Inc. have also become popular.

Kiwoom Securities Co.’s Structured Products Pegged to Tesla and Advanced Micro Devices Inc. Shares Prospectus Says Investors Could Lose Their Principal If Any Of The Shares Fall More Than 50% To Maturity Within One Year . Autocallables were sold in January, with Tesla shares trading at $343.85 a share.

The most read edition of Bloomberg Businessweek

© 2022 Bloomberg LP