Goldman Sold Largest Apple-Tied Note in 11 Months Before ResultsKevin Dugan
Goldman Sachs Group Inc. sold $29.9 million of six-month structured notes tied to Apple Inc. the day before the company announced earnings that sent its stock plunging 12 percent.
The securities, issued Jan. 22, yield 10 percent a year, plus any gains of the stock up to 11.25 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission. If Apple drops, the notes -- which were sold at a face value about the same as a share of the Cupertino, California-based company -- decline at the same rate, providing no protection against losses.
The notes are Goldman Sachs’s largest offering tied to the company since Feb. 24, according to data compiled by Bloomberg. Structured notes, which are bank debt packaged with derivatives, allow individual investors to take bets on everything from the price of gold to movements in stock volatility.
Tiffany Galvin, a spokeswoman for Goldman Sachs, declined to comment on the offering.
Notes tied to single stocks or indexes tend to limit the amount that investors can lose by including so-called barriers or principal protection, Bloomberg data show. Goldman sold $14 million of automatically callable three-year notes tied to the iPad maker on Jan. 4, the second-largest Apple note this month, that yield 9.2 percent a year and shield investor capital as long as the stock doesn’t fall more than 30 percent, according to a prospectus filed with the SEC.
Apple shares tumbled on Jan. 24 after the company posted the slowest profit growth since 2003 and the smallest sales increase in 14 quarters.
Last year, investors bought $1.75 billion of structured notes tied to Apple, making it the second-most popular reference measure after the Standard & Poor’s 500 Index, Bloomberg data show. Notes linked to Apple surpassed those tied to the London interbank offered rate for the first time since at least 2010, when Bloomberg began collecting comprehensive data on the securities.
Investors have bought $65.6 million of Apple-linked notes in January. On the day before the earnings report, HSBC Holdings Plc’s U.S. banking unit also sold $710,000 of notes tied to the company, and UBS AG issued $120,000 of securities.
Structured notes offer customized bets to retail investors while banks earn fees and raise money from selling the products. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.