The Securities Law Firm of KlaymanToskes (https://klamantoskes.wpengine.com) announced today that it is investigating claims on behalf of investors who sustained losses in Equity Linked Structured Products (“ELSPs”), tied to the price of Apple stock. Since last year, the price of Apple stock has declined from more than $700 per share to below $440. However, it was not only Apple shareholder that suffered losses. Investors who purchased ELSPs tied to the price of Apple stock have also suffered substantial damages. ELSPs are essentially bonds that can be converted into stocks of other companies. Features include a high interest payment, usually monthly, for a year or less. If the price of the stock that the products are tied to increases or remains close to its price when the bonds were issued, investors get back all of their money when the bonds come due. However, if the stock price declines over 20%, the bonds can become shares of the devalued stock. The purchaser of the ELSP are required to hold the bonds until maturity.
In 2012, when the price of Apple increased substantially, brokerage firms like Barclays, Morgan Stanley and JPMorgan Chase, sold over $722 million worth of ELSPs. About 450 new structured products issued in 2012 were tied to Apple. Approximately 75% of them were issued when Apple traded at about $550. With the decline in Apple’s share price, it is estimated that the value of ELSPs tied to Apple suffered a one week decline of over 15%. The majority of them are underwater. Many investors who purchased ELSPs had no idea of the true level of risk associated with the products. Many were led to believe that they were safe low risk debt instruments. Investors in ELSPs are essentially in the same position as someone who sells a “naked” put option, which results in a commitment to buy a stock he doesn’t yet own after it falls in price.
To make matters worse, it appears that while investors were losing money on these products, investment banks were benefiting. The ELSPs tied to Apple provided firms with an inexpensive way to hedge or bet against the price of Apple stock. Now, in connection with many ELSPs, brokerage firms can dump the devalued Apple stock on conservative bond investors.
Investors who purchased ELSPs tied to Apple from from a full-service broker-dealer and sustained significant losses can contact KlaymanToskes to explore their legal rights and options. The attorneys at KlaymanToskes are dedicated to pursuing claims on behalf of investors who have suffered investment losses. KlaymanToskes, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
If you have information relating to this investigation or have investment losses of $100,000 or more in ELSPs tied to Apple, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of KlaymanToskes, at 888-997-9956.