Analysis of Risks in Mirae Asset Securities ELW Issuance and Underlying Shareholder Returns
Mirae Asset Securities (credit AA) filed a batch report for ELWs worth up to 4.8 trillion won (actual issuance of 1.02 trillion). Underlyings include large caps such as Samsung Electronics and KB Financial.
Investment risk is very high: total loss possible if underlying price plunges (e.g., M504 series has 94.16% probability of -100% to -50% loss).
Credit risk of issuer and liquidity constraints (LP bid-ask spread 8-15%, quotes stopped 1 month before maturity) limit cashability.
Early termination risk: early termination upon issuer bankruptcy or underlying merger; if underlying price set to zero, full loss.
Tax risk: KOSPI200-linked ELWs are subject to capital gains tax; corporate investors subject to corporate tax.
Shareholder return policies of underlying companies: KB Financial's share cancellation, Samsung Electronics' dividend, etc. Positive for stock prices but do not offset ELW loss risk.
Volatility gap: expected volatility (59.63%) is lower than historical volatility (78.25%), potentially causing price divergence.
Delisting risk: due to insufficient liquidity, revocation of issuer's license, etc., making cash-out impossible.