Conduit Pharms SEC Filings

Royal Bank of Canada (RY) has filed a 424B2 preliminary pricing supplement for a new structured product: Auto-Callable Contingent Coupon Barrier Notes linked to the Class A common stock of Meta Platforms, Inc. (META). The notes form part of RBC’s Senior Global Medium-Term Notes, Series J program and settle on 23 July 2025, with a scheduled maturity of 21 August 2026 (approx. 2.1 years). They are senior unsecured obligations of the bank and are not deposit-insured or bail-inable.

Key economic terms

• Contingent coupon: 0.94% monthly (11.28% p.a.) paid only if META’s closing price on each observation date is ≥ 70% of the initial level (the “Coupon Threshold”). Investors may receive no coupons at all.
• Automatic call: From the sixth monthly observation (Jan 2026) onward, if META ≥ initial level on any observation date, the notes are redeemed early for 100% of principal plus the contingent coupon then due; no further payments thereafter.
• Principal protection: Conditional. At maturity, if the notes have not been called and META ≥ 70% of the initial level (the “Barrier”), investors receive par plus the final coupon. If META < 70%, investors receive physical delivery of META shares worth $1,000 ÷ initial level, exposing them to potentially large losses down to zero.
• Illustrative payouts: Hypothetical table shows full principal return when META decline ≤ 30%; 50% principal loss if META down 50%; total loss at 100% decline.
• Issue price: 100% of face value; underwriting discount 1.50%. Initial estimated value: $925 – $975 per $1,000, i.e., 2.5% – 7.5% below par, reflecting hedging and distribution costs.
• Credit risk: All payments depend on RBC’s ability to pay.
• Liquidity: The notes will not be listed on any exchange; secondary market, if any, will be made solely by RBC affiliates and may involve wide bid/ask spreads.

Risk highlights (selected)

• Principal loss risk: Investors are exposed to META downside beyond a 30% threshold.
• Coupon risk: Coupons are purely contingent; sustained META weakness eliminates income.
• No upside participation: Positive META performance above par accrues entirely to RBC.
• Early call risk: If META performs well, the note may be called quickly, truncating income potential and forcing reinvestment at lower rates.
• Valuation & liquidity: Initial value below issue price; secondary market prices likely below par and could be volatile.
• Tax uncertainty: Treated as prepaid financial contracts with ordinary income coupons; IRS could challenge treatment; withholding possible for non-U.S. holders.

Strategic context: For yield-seeking investors comfortable with META equity risk and RBC credit risk, the structure offers double-digit conditional income. However, the 70% barrier exposes investors to potentially steep capital losses, while upside is capped. From an issuer perspective, this is a routine funding transaction with limited impact on RBC’s financial profile.