JPMorgan’s 64 Percent Note Shows Risks of Reverse Convertibles
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A JPMorgan Chase & Co. reverse-convertible note paying 64 percent annualized interest plunged in value on May 14, three days after being sold, showing the risks of these products usually bought by individual investors.
The structured notes offered 10.7 percent in interest payments over their two-month term and a return of principal, as long as shares of TiVo Inc. didn’t fall more than 25 percent, according to a prospectus. TiVo dropped 42 percent on May 14 after an adverse court ruling, triggering a provision that will leave investors holding the possibly depressed stock at maturity.