Tesla’s Drop Puts $157 Million Korea Structured Products at Risk

(Bloomberg) — This year’s unprecedented plunge in Tesla Inc. has put $157 million worth of related Korean structured products at risk of capital loss unless the electric-vehicle giant’s stock stages a dramatic recovery.

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That’s the amount of principal that would be lost if Tesla shares fail to climb back to at least $134.5 per share, some 20% above its current level, before these so-called autocallables mature, according to Bloomberg calculations based on Korea Securities Depository data.

The products were sold to Korean retail investors, who have remained fiercely loyal to Tesla even amid its nearly 70% slide this year. Some were issued when Tesla traded above $300 per share, meaning a rebound of 60% or more is required before the autocallables reach maturity, typically within one or two years, or the principal will be forfeited.

Autocallables became popular with Korean individuals during the low-interest era by promising returns higher than savings, unless the underlying asset declines sharply. Many are built on stock benchmarks such as the Kospi 200 Index, though products tied to Tesla and other big stocks including Nvidia Corp. and Amazon.com Inc. have also become popular.

A prospectus for structured products tied to shares of both Tesla and Advanced Micro Devices Inc. issued by Kiwoom Securities Co. says investors may lose their principal if either stock falls more than 50% before maturity in one year. The autocallables were sold in January when Tesla traded at $343.85 per share.