Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
|
|||
Pricing Supplement
Dated April 22, 2024
To the Product Prospectus Supplement ERN-ES-1, the Prospectus Supplement and the Prospectus, Each Dated December 20, 2023
|
$1,000,000
Buffered Enhanced Return Notes with Absolute
Return Linked to the Lesser Performing of Two
Common Stocks Due April 27, 2026
Royal Bank of Canada
|
||
Reference Stock
|
Initial Stock Price
|
Buffer Price
|
||
Microsoft Corporation (“MSFT”)
|
$400.96
|
$320.77, which is 80% of its Initial Stock Price*
|
||
Tesla, Inc. (“TSLA”)
|
$142.05
|
$113.64, which is 80% of its Initial Stock Price
|
• |
If the Final Stock Price of the Lesser Performing Reference Stock (as defined below) is greater than its Initial Stock Price, the Notes will pay at maturity a return equal to 211.30% of the Percentage
Change.
|
• |
If the Final Stock Price of the Lesser Performing Reference Stock is less than or equal to its Initial Stock Price, but is greater than or equal to its Buffer Price, the Notes will pay a one-for-one positive
return equal to the absolute value of its Percentage Change.
|
• |
If the Final Stock Price of the Lesser Performing Reference Stock is less than its Buffer Price, investors will lose 1% of the principal amount of the Notes for each 1% that its Final Stock Price has
decreased below its Buffer Price.
|
• |
All payments on the Notes are subject to our credit risk.
|
• |
The Notes do not pay interest.
|
• |
The Notes will not be listed on any securities exchange.
|
Per Note
|
Total
|
||
Price to public(1)
|
100.00%
|
$1,000,000
|
|
Underwriting discounts and commissions(1)
|
0.70%
|
$7,000
|
|
Proceeds to Royal Bank of Canada
|
99.30%
|
$993,000
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
Issuer:
|
Royal Bank of Canada (the “Bank”)
|
|
Underwriter:
|
RBC Capital Markets, LLC (“RBCCM”)
|
|
Reference Stocks:
|
The common stock of Microsoft Corporation (“MSFT”) and the common stock of Tesla, Inc. (“TSLA”).
|
|
Minimum
Investment:
|
$1,000 and minimum denominations of $1,000 in excess thereof
|
|
Trade Date (Pricing
Date):
|
April 22, 2024
|
|
Issue Date:
|
April 25, 2024
|
|
Valuation Date:
|
April 22, 2026
|
|
Maturity Date:
|
April 27, 2026, subject to extension for market and other disruptions, as described in the product prospectus supplement dated December 20, 2023.
|
|
Interest Payments:
|
None. No payments will be made on the Notes prior to the maturity date.
|
|
Payment at
Maturity
(if held to
maturity):
|
If the Final Stock Price of the Lesser Performing Reference Stock is greater than its Initial Stock Price (that is, its Percentage Change is positive), then the investor will receive an amount in cash per $1,000 principal amount per Note
equal to:
Principal Amount + [Principal Amount x (Percentage Change of the Lesser Performing Reference Stock x Upside Participation Rate)]
If the Final Stock Price of the Lesser Performing Reference Stock is less than or equal to its Initial Stock Price, but is greater than or equal to its Buffer Price
(that is, its Percentage Change is between 0.00% and -20.00%), then the investor will receive an amount in cash per $1,000 principal amount per Note equal to:
Principal Amount + [Principal Amount x (-1 x Percentage Change of Lesser Performing Reference Stock)]
In this case the return on the Notes will be positive, even if the price of the Lesser Performing Reference Stock has decreased.
If the Final Stock Price of the Lesser Performing Reference Stock is less than its Buffer Price (that is,
its Percentage Change is less than -20%), then the investor will receive a cash payment per $1,000 principal amount per Note equal to:
Principal Amount + [Principal Amount x (Percentage Change of the Lesser Performing Reference Stock + Buffer Percentage)]
In this case, you may lose some or a significant portion of the principal amount.
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
Percentage
Change:
|
The Percentage Change of each Reference Stock, expressed as a percentage, is calculated using the following formula:
|
|
Lesser Performing
Reference Stock:
|
The Reference Stock with the lowest Percentage Change.
|
|
Initial Stock Price:
|
The closing price of the applicable Reference Stock on the Trade Date, as set forth on the cover page of this pricing supplement.
|
|
Final Stock Price:
|
The closing price of the applicable Reference Stock on the Valuation Date.
|
|
Upside
Participation Rate:
|
211.30%
|
|
Buffer Percentage:
|
20%
|
|
Buffer Price:
|
80% of the Initial Stock Price, as set forth on the cover page of this pricing supplement.
|
|
Principal at Risk:
|
The Notes are NOT
principal protected. You may lose a substantial portion of your principal amount at maturity if the Final Stock Price of the Lesser Performing Reference Stock is less than its Buffer Price.
|
|
Stock Settlement:
|
Not applicable. Payments on the Notes will be made only in cash.
|
|
Market Disruption
Events:
|
The occurrence of a market disruption event (or a non-trading day) as to a Reference Stock will result in the postponement of the Valuation Date as to
that Reference Stock, as described in the product prospectus supplement, but not to any non-affected Reference Stock.
|
|
Calculation Agent:
|
RBCCM
|
|
U.S. Tax
Treatment:
|
By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to
treat the Notes as a pre-paid cash-settled derivative contract linked to the Reference Stocks for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the
Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” and the discussion (including the opinion of Ashurst LLP, our special U.S. tax counsel) in the product prospectus supplement dated December 20, 2023, under “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” which apply to the Notes.
|
|
Secondary Market:
|
RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you may receive upon sale of your Notes prior to maturity may be less than the principal amount of your Notes.
|
|
Listing:
|
The Notes will not be listed on any securities exchange.
|
|
Clearance and
Settlement:
|
DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the prospectus
dated December 20, 2023).
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
Terms
Incorporated in the
Master Note:
|
All of the terms appearing on the cover page and above the item captioned "Secondary Market" in this section and the terms appearing under the caption “General Terms of the
Notes” in the product prospectus supplement, as modified by this pricing supplement.
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
Hypothetical Percentage Change of the
Lesser Performing Reference Stock
|
Payment at Maturity as Percentage of
Principal Amount
|
Payment at Maturity per $1,000
in Principal Amount
|
50.00%
|
205.65%
|
$2,056.50
|
40.00%
|
184.52%
|
$1,845.20
|
30.00%
|
163.39%
|
$1,633.90
|
20.00%
|
142.26%
|
$1,422.60
|
10.00%
|
121.13%
|
$1,211.30
|
5.00%
|
110.56%
|
$1,105.65
|
0.00%
|
100.00%
|
$1,000.00
|
-5.00%
|
105.00%
|
$1,050.00
|
-10.00%
|
110.00%
|
$1,100.00
|
-15.00%
|
115.00%
|
$1,150.00
|
-20.00%
|
120.00%
|
$1,200.00
|
-30.00%
|
90.00%
|
$900.00
|
-40.00%
|
80.00%
|
$800.00
|
-50.00%
|
70.00%
|
$700.00
|
-60.00%
|
60.00%
|
$600.00
|
-70.00%
|
50.00%
|
$500.00
|
-80.00%
|
40.00%
|
$400.00
|
-90.00%
|
30.00%
|
$300.00
|
-100.00%
|
20.00%
|
$200.00
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
Example 1 —
|
Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Stock is positive.
|
|
Percentage Change:
|
2%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (2% x 211.30%)] = $1,000 + $42.26 = $1,042.26
|
|
On a $1,000 investment, a 2% Percentage Change results in a Payment at Maturity of $1,042.26, a return of 4.226% on the Notes.
|
Example 2 —
|
Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Stock is negative (but not by more than the Buffer Percentage).
|
|
Percentage Change:
|
-10%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-1 x -10%)] = $1,000 + $100 = $1,100
|
|
On a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,100, a return of 10% on the Notes.
|
||
In this case, even though the Percentage Change is negative, you will receive a positive return equal to the absolute value of the Percentage Change.
|
Example 3 —
|
Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Stock is negative (by more than the Buffer Percentage).
|
|
Percentage Change:
|
-40%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-40% + 20%)] = $1,000 - $200 = $800
|
|
On a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $800, a return of -20% on the Notes.
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
• |
You May Receive Less than the Principal Amount at Maturity –– Investors in the Notes could lose a substantial portion of their principal amount if the Final Price of
the Lesser Performing Reference Stock is less than its Buffer Price. In such a case, you will lose 1% of the principal amount of the Notes for each 1% that its Final Stock Price is less than its Buffer Price.
|
• |
The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity –– There will be no periodic interest
payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could
earn on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
|
• |
Your Potential Payment at Maturity on the Downside Is Limited ––If the Lesser Performing Reference Stock decreases in value, but its Final Stock Price is not less than
its Buffer Price, your maximum payment at maturity will be $1,200 (reflecting a Percentage Change of -20%).
|
• |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes –– The Notes are our
senior unsecured debt securities. As a result, your receipt of any amounts due on the Notes is dependent upon our ability to repay our obligations at that time. This will be the case even if the prices of the Reference Stocks increase
or decrease after the Trade Date. No assurance can be given as to what our financial condition will be at maturity of the Notes.
|
• |
The Notes Are Linked to the Lesser Performing Reference Stock, Even if the Other Reference Stock Performs Better — Your return on the Notes will be determined solely
based on the performance of the Lesser Performing Reference Stock. For example, even if the Final Stock Price of the other Reference Stock has increased significantly compared to its respective Initial Stock Price, your return will only
be determined by reference to the performance of the Lesser Performing Reference Stock, regardless of the performance of the other Reference Stock.
|
• |
Your Payment on the Notes Will Be Determined by Reference to Each Reference Stock Individually, Not to a Basket, and the Payment at Maturity Will Be Based on the Performance
of the Lesser Performing Reference Stock — The Payment at Maturity will be determined only by reference to the performance of the Lesser Performing Reference Stock, regardless of the performance of the other Reference Stock.
The Notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend on the
weighted aggregate performance of the basket components reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of the other basket component, as scaled by the
weighting of that basket component. However, in the case of the Notes, the individual performance of each of the Reference Stocks would not be combined, and the depreciation of one Reference Stock would not be mitigated by any
appreciation of the other Reference Stocks. Instead, your return will depend solely on the Final Stock Price of the Lesser Performing Reference Stock. Accordingly, if the Final Stock Price of either Reference Stock is less than its
Buffer Price, you will incur a loss of principal on the Notes.
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
• |
There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in Significant Losses –– There may be little or no secondary market
for the Notes. The Notes will not be listed on any securities exchange. RBCCM or any of our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our affiliates may stop any
market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any secondary market would be
high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be substantial.
|
• |
The Initial Estimated Value of the Notes Is Less than the Price to the Public – The initial estimated value that is set forth on the cover page of this pricing
supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to maturity,
their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the prices of the Reference Stocks, the borrowing rate we pay to issue securities of this
kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the
Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other
relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount or the
hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to
price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you
should be able and willing to hold your Notes to maturity.
|
• |
The Initial Estimated Value of the Notes that Is Set Forth on the Cover Page of this Pricing Supplement Is an Estimate Only, Calculated as of the Time the Terms of the Notes
Were Set –The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See
“Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based
on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
|
• |
Our Business Activities and Those of Our Affiliates May Create Conflicts of Interest –– We and our affiliates expect to engage in trading activities related to the
Reference Stocks that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in
their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the prices of the
Reference Stocks, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with the issuers of the Reference Stocks (the ‘‘Reference Stock
Issuers’’), including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
• |
Owning the Notes Is Not the Same as Owning the Reference Stocks –– The return on your Notes is unlikely to reflect the return you would realize if you actually owned
the Reference Stocks. For example, you will not receive or be entitled to receive any dividend payments or other distributions on the Reference Stocks during the term of your Notes; accordingly, an investment in the Notes may return
less than an actual investment in the Reference Stocks. As an owner of the Notes, you will not have voting rights or any other rights that holders of the Reference Stocks may have. Furthermore, the Reference Stocks may appreciate
substantially during the term of the Notes, and you will not fully participate in such appreciation.
|
• |
There Is No Affiliation Between the Reference Stock Issuers and RBCCM, and RBCCM Is Not Responsible for any Disclosure by the Reference Stock Issuers — We are not
affiliated with the Reference Stock Issuers. However, we and our affiliates may currently, or from time to time in the future engage, in business with the Reference Stock Issuers. Nevertheless, neither we nor our affiliates assume any
responsibilities for the accuracy or the completeness of any information that any other company prepares. You, as an investor in the Notes, should make your own investigation into the Reference Stocks. The Reference Stock Issuers are
not involved in this offering and has no obligation of any sort with respect to your Notes. The Reference Stock Issuers have no obligation to take your interests into consideration for any reason, including when taking any corporate
actions that might affect the value of your Notes.
|
• |
The Reference Stocks Are Concentrated in One Sector — Both Reference Stocks are issued by companies in the technology sector. Although an investment in the Notes will
not give holders any ownership or other direct interests in the Reference Stocks, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment in companies in this sector.
Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
|
• |
The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments –– The payments on the Notes are subject to adjustment as
described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the Notes—Market Disruption Events” in
the product prospectus supplement.
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes with Absolute Return
Royal Bank of Canada
|