Tesla Inc. Chief Executive Officer Elon Musk's political moves have caused a sharp fluctuation in Tesla's stock price, leading to cases of principal loss in equity-linked securities (ELS) tied to Tesla as the underlying asset. After Musk announced the founding of a new party, Tesla's stock price fell below $300, and additional losses may occur in upcoming ELSs with approaching maturities.
ELS is a product that pays a predetermined revenue if stocks or stock indices serving as the underlying assets meet certain criteria by maturity. Conversely, if the conditions are not met by maturity, principal loss occurs. ELS usually has a maturity of three years, but there are also short-term products with a maturity of six months; this time, losses occurred in the short-term products issued when Tesla's stock price was at its peak.
According to the financial investment industry on the 8th, Shinyoung Securities ELS 'Shinyoung Securities Plan No. 12251' confirmed a principal loss on the evaluation date of maturity redemption on the 2nd. Shinyoung Securities plans to deliver physical redemption with Tesla shares on the 11th, reflecting a loss rate of -20.04%. If Tesla's stock price continues to decline, investors' losses may increase.
'Shinyoung Securities Plan No. 12251' was issued on January 10. The initial basis price was Tesla's stock price of $394.74. However, as Tesla's stock price continued to decline, it failed to meet the early redemption criteria set in April. CEO Musk's appointment as the first head of the government's efficiency department (DOGE) under the Trump administration became a stumbling block.
'Shinyoung Securities Plan No. 12251' also showed Tesla's stock price at $315.65 during this maturity redemption evaluation, which was below 100% of the initial basis price, resulting in a principal loss. The turmoil caused by CEO Musk's verbal exchange with President Trump had a significant effect on Tesla's sharp fluctuations in stock price.
Hana Securities' ELS 'No. 16125' also incurred a principal loss. This ELS also uses Tesla shares as the underlying asset. During its issuance on December 30 last year, the initial basis price was Tesla's stock price of $417.41. At the maturity evaluation on the 30th of last month, Tesla's stock price needed to exceed 80% of the initial basis price ($333.93), but it failed to meet the condition at $317.66. Hana Securities will redeem the ELS No. 16125 in Tesla shares on the 9th, reflecting a loss rate of -4.9%.
Cases of principal loss may increase in the future. Following CEO Musk's announcement of the founding of the 'America Party', Tesla shares closed at $293.94 on the New York Stock Exchange overnight. It dropped 6.79% ($21.41) in a single day. Concerns that conflicts with President Trump could intensify have weighed on the stock price.
The Hana Securities ELS 'No. 16139', which has its maturity redemption evaluation date on the coming 10th, requires Tesla's stock price to exceed $315.79. On the same day, another Hana Securities ELS 'No. 16141' must have Tesla's stock price above $296.06. If it does not rebound from the current price, both ELSs will incur principal loss.
There is still time until maturity, but warning signs have emerged for products issued last December that reached a peak of over $400 in Tesla's stock price. At that time, a total of nine ELSs based on Tesla shares are set to mature this year, totaling 3.85 billion won.
Mirae Asset Securities' ELS '35719' has an initial basis price (December 12, 2024) at Tesla's stock price of $418.1. If Tesla's stock price is below the initial basis price until the maturity evaluation by September 4, a principal loss will occur.
Hanwha Securities' 'Hanwha Super Tracker ELS No. 30058' also has an initial basis price (December 19, 2024) at Tesla's stock price of $436.17. If it does not exceed this price on the maturity redemption evaluation date on September 23, a principal loss will occur.
Not only ELS investors but also individual investors in Tesla stocks are increasingly voicing their concerns. The average evaluation profit rate of 308,418 Tesla investors linked to Naver Pay's 'My Assets' service is 5.65%. While still in the positive state, over 40% of investors are now in a loss zone.
The exchange-traded fund (ETF) 'TSLL', which tracks Tesla's daily stock price fluctuations at double the rate, has seen evaluation losses of 34.95% for 49,567 investors. More than 60% of investors are reporting losses.