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On July 21, 2026, Bank of Montreal finalized the pricing and issuance of Senior Medium-Term Notes, Series K, totaling $993,000 in principal amount. These autocallable barrier notes are tied to International Business Machines Corporation (IBM) common stock and feature a contingent quarterly coupon rate of 4.2875%, equating to approximately 17.15% annually. Automatic redemption is triggered if IBM stock closes above its initial reference price of $210.50 on any observation date starting October 2026. Investors face downside risk, potentially losing up to 100% of principal if IBM stock falls below 60% of the initial level by the maturity date in July 2029.
Key Points
- Bank of Montreal trades under NYSE ticker: WTIU
- Issued $993,000 of autocallable notes linked to IBM stock with a quarterly contingent coupon of 4.2875%
- Notes mature on July 24, 2029; initial level set at $210.50; call level at 100% of initial; trigger level at 60% ($126.30)
- Contingent coupons paid only if IBM stock closes at or above $126.30 on observation dates; automatic redemption occurs if stock exceeds $210.50
Autocallable Note Structure and Contingent Coupon Details
Bank of Montreal structured these autocallable barrier notes to provide investors with quarterly contingent interest payments, accepting early redemption and principal risk. The contingent coupon of 4.2875% per quarter (about 17.15% annually) is paid only if IBM stock closes at or above the coupon barrier level of $126.30 (60% of the initial $210.50) on each quarterly observation date. The first coupon observation date is October 2026, with subsequent dates quarterly on the 24th of October, January, April, and July, each three trading days prior to payment.
Investors risk no coupon payment if IBM stock closes below the barrier on any observation date. Each payable coupon equals $42.875 per $1,000 principal. Notes are issued in minimum $1,000 denominations and total $993,000 principal in this offering. Investors must be prepared to forgo coupons during periods of weak IBM stock performance.
Automatic Redemption and Call Settlement Terms
The notes feature an autocall mechanism allowing automatic early redemption starting October 21, 2026, if IBM stock closes above the call level of $210.50 on any observation date. Upon triggering, investors receive their principal plus any contingent coupon due on the following call settlement date, ending further payments. The call settlement date is the coupon payment date immediately after the trigger observation.
This redemption limits upside participation beyond the call level, prioritizing capital preservation and income for Bank of Montreal while capping investor gains from IBM stock appreciation. Early termination means investors may have their capital returned before the full three-year maturity.
Principal Risk and Trigger Event at Maturity
Principal repayment is not guaranteed at maturity. If the notes are not called early, the final payment depends on IBM stock’s closing price on July 19, 2029. A trigger event occurs if IBM closes below $126.30 (60% of initial level). If no trigger occurs, investors receive full principal plus any final coupon.
If a trigger event occurs, principal is reduced dollar-for-dollar with the stock’s decline below the initial level. For example, a 40% drop to $126.30 would result in $600 returned per $1,000 invested. Declines beyond 60% could lead to near-total principal loss.
IBM Stock as Reference Asset
The notes reference IBM common stock (ticker: IBM) with an initial level of $210.50 set on July 21, 2026. Coupon payments and redemption triggers depend on IBM’s closing price on observation dates. The notes are cash-settled only, with no rights to physical delivery or stock ownership, dividends, or voting rights. Bank of Montreal’s subsidiary BMOCM acts as calculation agent overseeing payments.
Investing in these notes differs from direct IBM stock ownership, as investors rely solely on stock price performance relative to set barriers without equity benefits.
Offering Pricing and Distribution
Priced at 100% of $1,000 principal on July 21, 2026, with settlement on July 24, 2026, the total offering size is $993,000. Bank of Montreal earned a 2% agent’s commission ($19,860), resulting in net proceeds of $973,140. The estimated initial note value was $966.34 per $1,000, reflecting derivative costs and hedging expenses.
Some dealers selling to fee-based advisory accounts may have reduced concessions, leading to public offering prices between $980 and $1,000 per $1,000 principal. Notes are not exchange-listed.
Credit and Regulatory Considerations
Payments depend on Bank of Montreal’s creditworthiness; the notes are unsecured obligations and not insured by FDIC, CDIC, or any government agency. BMOCM serves as agent and calculation agent. The notes are not convertible into Bank of Montreal or affiliate shares under Canadian deposit insurance regulations.
The offering complies with SEC registration, with the pricing supplement dated July 21, 2026, filed under Rule 424(b)(2). Prospectus documents detail risk factors and terms.
Investment Risks and Suitability
Risks include market exposure to IBM stock price fluctuations, Bank of Montreal credit risk, lack of liquidity due to no exchange listing, and structural risks from embedded derivatives. Investors may lose principal if IBM stock declines substantially. Contingent coupons may not be paid if IBM underperforms. Automatic redemption limits upside beyond the call level.
Investors must accept potential early redemption, limited upside, and possible principal loss. The offering documents highlight these and other risks, emphasizing the complexity and unpredictability of note valuation.
Settlement and Maturity Timeline
The notes settle on July 24, 2026, three business days after pricing. The final valuation date for IBM stock is July 19, 2029, three trading days before maturity on July 24, 2029. The three-year term includes quarterly contingent coupon payments if IBM stock meets barrier levels.
The final contingent coupon, if payable, is paid on maturity alongside principal. Coupon payment dates occur quarterly on October 24, January 24, April 24, and July 24, subject to market disruption adjustments per the March 25, 2025 product supplement.
Anti-Dilution Adjustments and Calculation Agent Authority
BMOCM, the calculation agent, may adjust reference asset levels for corporate actions like stock splits or dividends to preserve economic intent. Adjustments apply to initial, coupon barrier, trigger, and call levels as needed.
These anti-dilution provisions ensure fair comparison of stock price levels over time. Investors should consult the product supplement for full details on adjustment mechanisms and calculation agent discretion.
