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The Bank of Nova Scotia has priced equity-linked securities linked to the lowest-performing common stock among American Express Company, Intel Corporation, Mastercard Incorporated, and Visa Inc., as detailed in a pricing supplement filed on July 20, 2026. These securities feature a contingent coupon with memory, automatic call provisions, and principal at risk, maturing on July 25, 2029. This complex structured debt instrument is designed for holding until maturity and carries significant risks, including the potential loss of more than half the principal investment.
Key Points
- NYSE: BNS
- The Bank of Nova Scotia issued structured equity-linked securities maturing July 25, 2029, linked to the lowest-performing stock among American Express, Intel, Mastercard, and Visa
- Securities priced at $1,000 each with a contingent coupon rate of 26.75% per annum, payable only if the lowest-performing stock closes at or above 60% of its initial price on monthly calculation dates
- Principal at risk: full downside exposure if the lowest-performing stock falls below 50% of its initial price on the final calculation date; automatic call triggered if any underlying stock meets or exceeds its initial price on monthly calculation dates through June 2029
Equity-Linked Securities Tied to Four Leading Financial and Technology Stocks
The Bank of Nova Scotia’s equity-linked securities are structured to track the performance of the lowest-performing stock among four prominent companies: American Express Company, Intel Corporation, Mastercard Incorporated, and Visa Inc. This "worst performer" structure means that even if three stocks perform well, the securities’ returns depend solely on the stock with the poorest performance. These companies represent a blend of payment processing, financial services, and semiconductor technology sectors.
Issued as senior unsecured debt obligations by The Bank of Nova Scotia, the securities had an estimated value of $928.62 per security (92.862% of par) on the pricing date, factoring in dealer spreads and projected hedging profits. The Bank cautions that these components may negatively impact secondary market prices for investors seeking to sell before maturity.
Conditional Contingent Coupon Payments with Memory Feature
These securities offer a contingent coupon at an annual rate of 26.75%, payable monthly only if the lowest-performing stock closes at or above 60% of its starting price on the relevant monthly calculation date. The coupon threshold is set at 60% of each stock’s initial price.
The memory feature allows investors to receive unpaid coupons from previous months if the lowest-performing stock later recovers to or surpasses the coupon threshold. If the stock remains below the threshold throughout the term, no contingent coupons are paid.
Automatic Call Provision Based on Stock Price Recovery
The securities include an automatic call feature that may terminate the investment early. If the lowest-performing stock closes at or above its starting price on any monthly calculation date from January 2027 through June 2029, the securities will be automatically called. Upon automatic call, investors receive the principal amount plus a final contingent coupon and any accumulated unpaid coupons.
This automatic call limits upside potential, as the investment ends once the lowest-performing stock recovers, regardless of the performance of the other stocks.
Principal at Risk with Significant Downside Exposure
Unlike traditional debt instruments, these securities expose investors to principal loss. If not called early, investors receive the principal at maturity only if the lowest-performing stock closes at or above 50% of its initial price on the final calculation date. Falling below this threshold could result in losses exceeding 50%, potentially wiping out the entire principal.
The Bank’s disclosure highlights that investors will not benefit from any appreciation or dividends of the underlying stocks and bear full downside risk tied to the lowest-performing stock.
Issuer Credit Risk Concentrated with The Bank of Nova Scotia
All payments, including coupons, principal at maturity, and call proceeds, depend on The Bank of Nova Scotia’s creditworthiness. These securities are not insured by any Canadian or U.S. deposit insurance agencies. In the event of financial distress or insolvency of the Bank, investors could lose their entire investment regardless of stock performance.
As senior unsecured debt, holders rank above equity but below secured creditors in bankruptcy. The Bank emphasizes that issuer credit risk remains a critical factor since the equity-linked structure offers no protection against default.
Offering Details and Distribution Structure
The securities were offered at $1,000 each as per the July 20, 2026 pricing supplement. Scotia Capital (USA) Inc., an affiliate of The Bank of Nova Scotia, purchased the securities for distribution to registered broker-dealers including Wells Fargo Securities, LLC. The total offering amounted to $1,719,000, consisting of 1,719 securities.
The distribution includes an agent discount of $23.25 per security (2.325%), resulting in net proceeds of $976.75 per security to the Bank. Wells Fargo Securities sells to dealers at a discounted price and may provide selling concessions of $17.50 (1.75%) per security. Wells Fargo Advisors may receive a distribution fee of $0.75 (0.075%) per security. The Bank may also pay up to $3.00 per security to selected dealers for marketing and distribution services.
Complex Features Introduce Risks Beyond Traditional Debt
The Bank underscores the complexity of these securities, which combine contingent coupons, automatic call provisions, and principal at risk, all linked to the single lowest-performing stock. Investors must monitor four stock performances but understand that only the worst performer dictates outcomes at each calculation date.
This "worst of" structure differs fundamentally from diversified investments, concentrating downside risk. Favorable performance by other stocks does not mitigate losses caused by the lowest-performing stock. The pricing supplement and related documents provide extensive risk disclosures spanning multiple pages.
Secondary Market Liquidity and Valuation Notes
The securities are not exchange-listed and intended to be held to maturity, limiting liquidity for investors needing early exit. Scotia Capital (USA) Inc. or affiliates may engage in market-making, but no liquidity or pricing guarantees exist.
The Bank’s valuation method includes dealer spreads and hedging profits, likely resulting in secondary market prices below the original offering price. Secondary market pricing is unpredictable and may disadvantage sellers before maturity.
Regulatory Filings and Investor Due Diligence
The July 20, 2026 pricing supplement was filed under Rule 424(b)(2) referencing a registration statement, product supplement, prospectus supplement, and base prospectus. Neither the SEC nor any state securities commission has approved or disapproved the securities or verified the accuracy of the disclosure. Any contrary representation is a criminal offense.
Investors are advised to review all related documents to fully understand the terms, risks, and mechanics of these equity-linked securities with contingent payments and principal risk.
