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Apple Linked Reverse Convertibles (RevCons) Prove Risky as Maturity Nears

With high profile Morgan Stanley and RBC Capital Markets, LLC Apple Inc. (AAPL)-linked reverse convertibles (also called "RevCons," "Revertibles" and/or "Reverse Convertible Notes" ) set to mature between March and October of 2013, substandard performance by NASDAQ's AAPL stock has put many investors at risk.

In December, for instance, Bloomberg predicted that at least $241 million of structured notes tied to the Apple stock have been put in jeopardy of facing losses following a severe drop in the Apple's price per share.

As Apple Inc.'s stock has dropped even further since then—shares fell to a 52-week low on March 4, 2013 and are presently hovering around the $420 level—investors stand to lose even more, as RBC placed Apple and competitor Microsoft Corporation in a "worst performing of two equity securities" RevCon, which matures on March 13, 2013 following a valuation of March 8, 2013.

Contained within RBC's pricing supplement was a 12-year historical graph of closing price per share of the Apple stock, with a period-end closing price of $541.99 on the pricing date of 3/8/12 and issue date of 3/13/12.

Similarly, Morgan Stanley issued 12-month RevCons tied to Apple stock in late 2012 with maturity set for October 18, 2013. The initial share price was $628.10. With a trigger level of 70%, AAPL has already fallen below the corresponding trigger price of $439.670.

Accordingly in the case of Morgan Stanley's RevCon, if Apple's stock closes below the initial price of $628.10 on October 11, 2013 (valuation date), customers stand to lose a significant amount of their principle investments.

For RBC, that amount is $541.99.

As the case of the sudden market pariah Apple Inc. stock demonstrates, reverse convertibles or RevCons can be incredibly risky endeavors, which is reflected by the following sentenced embedded within the pricing supplement: "Investors may lose their entire initial investment in the RevCons."

If an advisor or stockbroker has sold you reverse convertible securities which resulted in the stock being put to you for a loss, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
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