Bank of Nova Scotia Launches $15.6 Million Auto-Callable Contingent Income Securities Linked to Palantir Technologies Stock

Structured Product Design and Payment Details

The Bank of Nova Scotia structured these securities to provide contingent quarterly coupon payments rather than fixed interest. Investors receive $41.40 per security per quarter if Palantir Technologies common stock closes at or above 50% of its initial price on each determination date. This coupon rate offers a premium return to compensate for the principal-at-risk nature of the investment, significantly exceeding traditional debt yields at issuance.

A memory coupon feature allows investors to collect previously missed coupons if the stock price recovers above the threshold on later dates. However, if Palantir’s stock remains below 50% of its initial price on all determination dates during the three-year term, no coupons will be paid, resulting in no positive return despite holding until maturity. This structure exposes investors to the risk of receiving no income while facing potential principal loss.

Palantir Technologies Stock as the Reference Asset

The securities reference Palantir Technologies Inc. common stock (Bloomberg ticker "PLTR UW"), a data analytics company serving commercial and government sectors. This selection reflects interest in high-growth, volatile technology equities suitable for structured product strategies. Payments are subject to the credit risk of Bank of Nova Scotia, meaning investor returns depend on both Palantir’s stock performance and the bank’s ability to meet its obligations.

Investors do not participate in any stock price appreciation beyond the contingent coupons. The offering explicitly states that returns are limited to coupons earned, with no upside from stock price gains. This positions the securities as income-focused instruments designed to capture option premium and volatility rather than equity capital appreciation, a common feature of auto-callable structured products.

Determination Dates and Coupon Schedule

There are 12 quarterly determination dates over the three-year term, starting October 19, 2026, about three months after issuance. Subsequent dates occur quarterly through July 17, 2029, the final determination date. Dates may be postponed for non-trading days or market disruptions, maintaining flexibility while preserving the quarterly schedule and maturity timeline.

Coupon payments follow each determination date by approximately three business days, beginning October 22, 2026, and ending on maturity, July 20, 2029. Payment dates may also be postponed for non-business days or other specified events. Coupons are contingent on Palantir stock maintaining value above the downside threshold, meaning payments are not guaranteed at any determination date.

Principal-at-Risk and Downside Exposure

The securities do not guarantee principal repayment or regular interest. The full $1,000 principal per security is at risk if Palantir’s stock closes below 50% of the initial price at maturity. In that case, principal repayment is reduced proportionally based on the final stock price relative to the initial price, potentially resulting in significant losses or total principal loss.

Investors face the risk of losing their entire investment if Palantir’s stock declines 50% or more by July 2029. The offering is designed for investors willing to accept capital impairment risk in exchange for above-market coupon opportunities. The documentation stresses suitability for sophisticated investors with appropriate risk tolerance and capital resources.

Auto-Call Feature and Early Redemption

The securities include an auto-callable feature allowing automatic early redemption if Palantir’s stock closes at or above a specified call threshold on any determination date before maturity. Upon trigger, the securities are redeemed on the next coupon payment date, paying principal plus the current and any unpaid prior coupons.

This early redemption caps investor returns regardless of further stock appreciation. After redemption, no additional coupons accrue. The specific call threshold price relative to the initial price is detailed in supplemental pricing documents. This feature limits issuer exposure to equity rallies while capping investor upside, a common characteristic of structured products.

Issuance and Settlement Details

Pricing occurred on July 17, 2026, establishing the initial Palantir stock price. The original issue date is July 22, 2026, three business days post-pricing (T+3), standard for structured products aimed at institutional and accredited investors. Secondary market trades prior to one business day before delivery require alternative settlement arrangements to avoid failed trades due to the extended settlement timeline.

The total principal issued is $15.576 million, divided into 15,576 securities at $1,000 each. The minimum investment is one security unit. These securities are part of Bank of Nova Scotia's Senior Note Program, Series A, ranking as senior unsecured debt obligations subordinate to secured debt but senior to subordinated debt and equity.

Credit Risk and Unsecured Obligations

All payments, including coupons and principal, are subject to Bank of Nova Scotia’s credit risk. A default by the bank could result in loss of all amounts owed, independent of Palantir’s stock performance. The securities are unsecured, with no collateral or security interest in the underlying stock or assets.

Investors hold a general creditor position, subordinated to secured creditors in insolvency scenarios. This dual exposure to equity market and issuer credit risk requires careful evaluation of both Palantir’s stock trajectory and the bank’s financial strength. No credit enhancements or guarantees beyond the bank’s senior unsecured status are provided.

No Equity Appreciation Participation

The securities do not allow investors to benefit from Palantir stock appreciation beyond contingent coupons. Returns are limited to coupons earned and principal repayment or reduction based on final stock price. This contrasts with traditional equity or convertible securities that offer upside participation.

Investors effectively purchase a time-decay instrument where equity appreciation benefits the issuer through embedded option premiums. This reflects Bank of Nova Scotia’s strategy of monetizing volatility via structured products, offering investors a fixed coupon band rather than equity market gains.

Market Disruption and Postponement Provisions

The offering includes provisions for postponing determination and maturity dates due to market disruptions such as trading halts or settlement issues affecting Palantir stock valuation. Detailed definitions and procedures are in the product supplement dated November 8, 2024.

These provisions introduce timing uncertainty for coupon payments and maturity but ensure fair valuation during extraordinary market events. Investors should review full documentation to understand potential impacts on investment timelines.

Investor Suitability and Risk Considerations

The Bank of Nova Scotia clearly states these securities are suitable only for investors willing to risk their entire investment to pursue above-market coupon income. The documentation highlights the possibility of receiving no interest over the full term and potential principal loss.

Investors must believe Palantir’s stock will not fall more than 50% and accept the risk of no coupon payments if the stock remains below the threshold. Financial advisors should conduct thorough suitability assessments considering financial position, objectives, and risk tolerance before recommending these principal-at-risk products. The securities offer a total-return contingent structure distinct from traditional income-generating debt instruments.