08/19/2024 | Press release | Distributed by Public on 08/19/2024 13:07
The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated August 19, 2024
August , 2024 | Registration Statement Nos. 333-270004 and 333-270004-01; Rule 424(b)(2) |
JPMorgan Chase Financial Company LLC
Structured Investments
Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF due December 29, 2025
Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
· | The notes are designed for investors who seek a return of 1.50 times any appreciation of an equally weighted basket of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF, up to a maximum return of at least 11.75%, at maturity. |
· | Investors should be willing to forgo interest and dividend payments and be willing to lose up to 85.00% of their principal amount at maturity. |
· | The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co. Any payment on the notes is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as guarantor of the notes. |
· | Minimum denominations of $1,000 and integral multiples thereof |
· | The notes are expected to price on or about August 23, 2024 and are expected to settle on or about August 28, 2024. |
· | CUSIP: 48135TJP9 |
Investing in the notes involves a number of risks. See "Risk Factors" beginning on page S-2 of the accompanying prospectus supplement, Annex A to the accompanying prospectus addendum, "Risk Factors" beginning on page PS-11 of the accompanying product supplement and "Selected Risk Considerations" beginning on page PS-3 of this pricing supplement.
Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement, prospectus and prospectus addendum. Any representation to the contrary is a criminal offense.
Price to Public (1) | Fees and Commissions (2) | Proceeds to Issuer | |
Per note | $1,000 | $ | $ |
Total | $ | $ | $ |
(1) See "Supplemental Use of Proceeds" in this pricing supplement for information about the components of the price to public of the notes. (2) J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated or unaffiliated dealers. In no event will these selling commissions exceed $7.25 per $1,000 principal amount note. See "Plan of Distribution (Conflicts of Interest)" in the accompanying product supplement. |
If the notes priced today, the estimated value of the notes would be approximately $984.00 per $1,000 principal amount note. The estimated value of the notes, when the terms of the notes are set, will be provided in the pricing supplement and will not be less than $960.00 per $1,000 principal amount note. See "The Estimated Value of the Notes" in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I dated April 13, 2023, underlying supplement no. 1-I dated April 13, 2023, the prospectus and prospectus supplement, each dated April 13, 2023, and the prospectus addendum dated June 3, 2024
Key Terms
Issuer:JPMorgan Chase Financial Company LLC, a direct, wholly owned finance subsidiary of JPMorgan Chase & Co.
Guarantor: JPMorgan Chase & Co.
Basket: The notes are linked to an equally weighted basket consisting of the following:
· | 1/3 of the iShares® MSCI India ETF (Bloomberg ticker: INDA); |
· | 1/3 of the iShares® MSCI Japan ETF (Bloomberg ticker: EWJ); and |
· | 1/3 of the iShares® MSCI EAFE ETF (Bloomberg ticker: EFA); |
(each, a "Fund" and together, the "Funds").
Upside Leverage Factor:1.50
Maximum Return:At least 11.75% (corresponding to a maximum payment at maturity of at least $1,117.50 per $1,000 principal amount note) (to be provided in the pricing supplement)
Buffer Amount:15.00%
Pricing Date:On or about August 23, 2024
Original Issue Date (Settlement Date): On or about August 28, 2024
Observation Date*: December 23, 2025
Maturity Date*:December 29, 2025
* Subject to postponement in the event of a market disruption event and as described under "General Terms of Notes - Postponement of a Determination Date - Notes Linked to Multiple Underlyings" and "General Terms of Notes - Postponement of a Payment Date" in the accompanying product supplement
Payment at Maturity:
If the Final Basket Value is greater than the Initial Basket Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Basket Return × Upside Leverage Factor), subject to the Maximum Return
If the Final Basket Value is equal to the Initial Basket Value or is less than the Initial Basket Value by up to the Buffer Amount, you will receive the principal amount of your notes at maturity.
If the Final Basket Value is less than the Initial Basket Value by more than the Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + [$1,000 × (Basket Return + Buffer Amount)]
If the Final Basket Value is less than the Initial Basket Value by more than the Buffer Amount, you will lose some or most of your principal amount at maturity.
Basket Return:
(Final Basket Value - Initial Basket Value)
Initial Basket Value
Initial Basket Value: Set equal to 100.00 on the Pricing Date
Final Basket Value: The closing level of the Basket on the Observation Date
Closing Level of the Basket:
100 × [1 + (1/3 × Fund Return of the SPDR® Dow Jones Industrial AverageSM ETF Trust) + (1/3 × Fund Return of the iShares® Russell 2000 ETF) + (1/3 × Fund Return of the Invesco QQQ TrustSM, Series 1)]
Fund Return: With respect to each Fund,
(Final Value - Initial Value)
Initial Value
Initial Value:With respect to each Fund, the closing price of one share of that Fund on the Pricing Date
Final Value: With respect to each Fund, the closing price of one share of that Fund on the Observation Date
Share Adjustment Factor:With respect to each Fund, the Share Adjustment Factor is referenced in determining the closing price of one share of that Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor of each Fund is subject to adjustment upon the occurrence of certain events affecting that Fund. See "The Underlyings - Funds - Anti-Dilution Adjustments" in the accompanying product supplement for further information.
PS-1 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
Supplemental Terms of the Notes
Any values of the Funds, and any values derived therefrom, included in this pricing supplement may be corrected, in the event of manifest error or inconsistency, by amendment of this pricing supplement and the corresponding terms of the notes. Notwithstanding anything to the contrary in the indenture governing the notes, that amendment will become effective without consent of the holders of the notes or any other party.
Hypothetical Payout Profile
The following table illustrates the hypothetical total return at maturity on the notes. The "total return" as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume the following:
· | an Initial Basket Value of 100.00; |
· | an Upside Leverage Factor of 1.50; |
· | a Maximum Return of 11.75%; and |
· | a Buffer Amount of 15.00%. |
Each hypothetical total return or hypothetical payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
Final Basket Value | Basket Return | Total Return on the Notes | Payment at Maturity |
180.00000 | 80.00000% | 11.75% | $1,117.50 |
165.00000 | 65.00000% | 11.75% | $1,117.50 |
150.00000 | 50.00000% | 11.75% | $1,117.50 |
140.00000 | 40.00000% | 11.75% | $1,117.50 |
130.00000 | 30.00000% | 11.75% | $1,117.50 |
120.00000 | 20.00000% | 11.75% | $1,117.50 |
110.00000 | 10.00000% | 11.75% | $1,117.50 |
107.83334 | 7.83334% | 11.75% | $1,117.50 |
105.00000 | 5.00000% | 7.50% | $1,075.00 |
101.00000 | 1.00000% | 1.50% | $1,015.00 |
100.00000 | 0.00000% | 0.00% | $1,000.00 |
95.00000 | -5.00000% | 0.00% | $1,000.00 |
90.00000 | -10.00000% | 0.00% | $1,000.00 |
85.00000 | -15.00000% | 0.00% | $1,000.00 |
80.00000 | -20.00000% | -5.00% | $950.00 |
70.00000 | -30.00000% | -15.00% | $850.00 |
60.00000 | -40.00000% | -25.00% | $750.00 |
50.00000 | -50.00000% | -35.00% | $650.00 |
40.00000 | -60.00000% | -45.00% | $550.00 |
30.00000 | -70.00000% | -55.00% | $450.00 |
20.00000 | -80.00000% | -65.00% | $350.00 |
10.00000 | -90.00000% | -75.00% | $250.00 |
0.00000 | -100.00000% | -85.00% | $150.00 |
PS-2 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
How the Notes Work
Upside Scenario:
If the Final Basket Value is greater than the Initial Basket Value, investors will receive at maturity the $1,000 principal amount plus a return equal to the Basket Return times the Upside Leverage Factor of 1.50, up to the Maximum Return of at least 11.75%. Assuming a hypothetical Maximum Return of 11.75%, an investor will realize the maximum payment at maturity at a Final Basket Value at or above approximately 107.83334% of the Initial Basket Value.
· | If the closing level of the Basket increases 1.00%, investors will receive at maturity a return equal to 1.50%, or $1,015.00 per $1,000 principal amount note. |
· | Assuming a hypothetical Maximum Return of 11.75%, if the closing level of the Basket increases 65.00%, investors will receive at maturity a return equal to the 11.75% Maximum Return, or $1,117.50 per $1,000 principal amount note, which is the maximum payment at maturity. |
Par Scenario:
If the Final Basket Value is equal to the Initial Basket Value or is less than the Initial Basket Value by up to the Buffer Amount of 15.00%, investors will receive at maturity the principal amount of their notes.
Downside Scenario:
If the Final Basket Value is less than the Initial Basket Value by more than the Buffer Amount of 15.00%, investors will lose 1% of the principal amount of their notes for every 1% that the Final Basket Value is less than the Initial Basket Value by more than the Buffer Amount.
· | For example, if the closing level of the Basket declines 60.00%, investors will lose 45.00% of their principal amount and receive only $550.00 per $1,000 principal amount note at maturity, calculated as follows: |
$1,000 + [$1,000 × (-60.00% + 15.00%)] = $550.00
The hypothetical returns and hypothetical payments on the notes shown above apply only if you hold the notes for their entire term. These hypotheticals do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected Risk Considerations
An investment in the notes involves significant risks. These risks are explained in more detail in the "Risk Factors" sections of the accompanying prospectus supplement and product supplement and in Annex A to the accompanying prospectus addendum.
Risks Relating to the Notes Generally
· | YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS - |
The notes do not guarantee any return of principal. If the Final Basket Value is less than the Initial Basket Value by more than 15.00%, you will lose 1% of the principal amount of your notes for every 1% that the Final Basket Value is less than the Initial Basket Value by more than 15.00%. Accordingly, under these circumstances, you will lose up to 85.00% of your principal amount at maturity.
· | YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE MAXIMUM RETURN, |
regardless of any appreciation of the Basket, which may be significant.
· | CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. - |
Investors are dependent on our and JPMorgan Chase & Co.'s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase & Co.'s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
· | AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS - |
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of our securities and the collection of intercompany obligations. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of JPMorgan Chase & Co. to make payments under loans made by us to
PS-3 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
JPMorgan Chase & Co. or under other intercompany agreements. As a result, we are dependent upon payments from JPMorgan Chase & Co. to meet our obligations under the notes. We are not a key operating subsidiary of JPMorgan Chase & Co. and in a bankruptcy or resolution of JPMorgan Chase & Co. we are not expected to have sufficient resources to meet our obligations in respect of the notes as they come due. If JPMorgan Chase & Co. does not make payments to us and we are unable to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co. For more information, see the accompanying prospectus addendum.
· | THE NOTES DO NOT PAY INTEREST. |
· | CORRELATION (OR LACK OF CORRELATION) OF THE FUNDS - |
The notes are linked to an equally weighted Basket composed of three Funds. In calculating the Final Basket Value, an increase in the price of one share of one of the Funds may be moderated, or more than offset, by lesser increases or declines in the prices of one share of the other Funds. In addition, high correlation of movements in the prices of one share of the Funds during periods of negative returns among the Funds could have an adverse effect on the payment at maturity on the notes.
· | YOU WILL NOT RECEIVE DIVIDENDS ON ANY FUND OR THE SECURITIES HELD BY ANY FUND OR HAVE ANY RIGHTS WITH RESPECT TO ANY FUND OR THOSE SECURITIES. |
· | LACK OF LIQUIDITY - |
The notes will not be listed on any securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes. You may not be able to sell your notes. 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 FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT - |
You should consider your potential investment in the notes based on the minimums for the estimated value of the notes and the Maximum Return.
Risks Relating to Conflicts of Interest
· | POTENTIAL CONFLICTS - |
We and our affiliates play a variety of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.'s economic interests are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to "Risk Factors - Risks Relating to Conflicts of Interest" in the accompanying product supplement.
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes
· | THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES - |
The estimated value of the notes is only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See "The Estimated Value of the Notes" in this pricing supplement.
· | THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS' ESTIMATES - |
See "The Estimated Value of the Notes" in this pricing supplement.
· | THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE - |
The internal funding rate used in the determination of the estimated value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates' view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain market inputs and assumptions, which may
PS-4 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
prove to be incorrect, and is intended to approximate the prevailing market replacement funding rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. See "The Estimated Value of the Notes" in this pricing supplement.
· | THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD - |
We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See "Secondary Market Prices of the Notes" in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
· | SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES - |
Any secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices may exclude selling commissions, projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you.
· | SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS - |
The secondary market price of the notes during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the level of the Basket. Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary market. See "Risk Factors - Risks Relating to the Estimated Value and Secondary Market Prices of the Notes - Secondary market prices of the notes will be impacted by many economic and market factors" in the accompanying product supplement.
Risks Relating to the Basket
· | THERE ARE RISKS ASSOCIATED WITH THE FUNDS - |
The Funds are subject to management risk, which is the risk that the investment strategies of the applicable Fund's investment adviser, the implementation of which is subject to a number of constraints, may not produce the intended results. These constraints could adversely affect the market prices of the shares of the Funds and, consequently, the value of the notes.
· | THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE PERFORMANCE OF THAT FUND'S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE - |
Each Fund does not fully replicate its Underlying Index (as defined under "The Basket" below) and may hold securities different from those included in its Underlying Index. In addition, the performance of each Fund will reflect additional transaction costs and fees that are not included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance of each Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying a Fund (such as mergers and spin-offs) may impact the variance between the performances of that Fund and its Underlying Index. Finally, because the shares of each Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value of one share of each Fund may differ from the net asset value per share of that Fund.
During periods of market volatility, securities underlying each Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per share of that Fund and the liquidity of that Fund may be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares of a Fund. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of a Fund. As a result, under these circumstances, the market value of shares of a Fund may vary substantially from the net asset value per share of that Fund. For all of the foregoing reasons, the performance of each Fund may
PS-5 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
not correlate with the performance of its Underlying Index as well as the net asset value per share of that Fund, which could materially and adversely affect the value of the notes in the secondary market and/or reduce any payment on the notes.
· | NON-U.S. SECURITIES RISK - |
The equity securities held by each Fund have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the home countries and/or the securities markets in the home countries of the issuers of those non-U.S. equity securities. Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting requirements of the SEC.
· | EMERGING MARKETS RISK WITH RESPECT TO THE iSHARES® MSCI INDIA ETF - |
The equity securities held by the iShares® MSCI India ETF have been issued by non-U.S. companies located in emerging markets countries. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times.
· | THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK - |
Because the prices of the equity securities held by each Fund are converted into U.S. dollars for purposes of calculating the net asset value of that Fund, holders of the notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by that Fund trade. With respect to each Fund, your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of equity securities held by that Fund denominated in each of those currencies. If, taking into account the relevant weighting, the U.S. dollar strengthens against those currencies, the price of the relevant Fund will be adversely affected and any payment on the notes may be reduced.
· | THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED - |
The calculation agent will make adjustments to the Share Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent will not make an adjustment in response to all events that could affect the shares of the Funds. If an event occurs that does not require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
PS-6 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
The Basket
The return on the notes is linked to an equally weighted basket consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF.
The iShares® MSCI India ETF is an exchange-traded fund of iShares® Trust, a registered investment company, that seeks to track the investment results, before fees and expenses, of an index composed of Indian equities, which we refer to as the Underlying Index with respect to the Fund. The Underlying Index with respect to the iShares® MSCI India ETF is currently the MSCI India Index. The MSCI India Index is a free float-adjusted market capitalization index that is designed to measure the large- and mid-cap segment of the Indian equity market. The Fund trades on Cboe BZX Exchange, Inc. under the ticker symbol "INDA." For additional information about the iShares® MSCI India ETF, see "Fund Descriptions - The iShares® ETFs" in the accompanying underlying supplement. For purposes of the accompanying underlying supplement, the Fund is an "iShares® ETF."
The iShares® MSCI Japan ETF is an exchange-traded fund of the iShares®, Inc., a registered investment company, that seeks to track the investment results, before fees and expenses, of an index composed of Japanese equities, which we refer to as the Underlying Index with respect to the iShares® MSCI Japan ETF. The Underlying Index with respect to the iShares® MSCI Japan ETF is currently the MSCI Japan Index. The MSCI Japan Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of the large- and mid-capitalization segments of the Japanese equity market. For additional information about the iShares® MSCI Japan ETF, see "Fund Descriptions - The iShares® ETFs" in the accompanying underlying supplement.
The iShares® MSCI EAFE ETF is an exchange-traded fund of iShares® Trust, a registered investment company, that seeks to track the investment results, before fees and expenses, of an index composed of large- and mid-capitalization developed market equities, excluding the United States and Canada, which we refer to as the Underlying Index with respect to the iShares® MSCI EAFE ETF. The Underlying Index with respect to the iShares® MSCI EAFE ETF is currently the MSCI EAFE® Index. The MSCI EAFE® Index is a free float-adjusted market capitalization index intended to measure the equity market performance of certain developed markets, excluding the United States and Canada. For additional information about the iShares® MSCI EAFE ETF, see "Fund Descriptions - The iShares® ETFs" in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical performance of the Basket as a whole, as well as each Fund, based on the weekly historical closing prices of one share of each Fund from January 4, 2019 through August 16, 2024. The graph of the historical performance of the Basket assumes that the closing level of the Basket on January 4, 2019 was 100 and that the weights of the Funds were as specified under "Key Terms - Basket" in this pricing supplement on that date. The closing price of one share of the iShares® MSCI India ETF on August 16, 2024 was $56.37. The closing price of one share of the iShares® MSCI Japan ETF on August 16, 2024 was $69.37. The closing price of one share of the iShares® MSCI EAFE ETF on August 16, 2024 was $80.33. We obtained the closing prices of one share of the Funds above and below from the Bloomberg Professional® service ("Bloomberg"), without independent verification. The closing prices of one share of each Fund above and below may have been adjusted by Bloomberg for actions taken by that Fund, such as stock splits.
The historical closing levels of the Basket and the historical closing prices of one share of each Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Basket on the Observation Date or the closing prices of one share of the Funds on the Observation Date. There can be no assurance that the performance of the Basket will result in the return of any of your principal amount in excess of $150.00 per $1,000 principal amount note, subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co.
PS-7 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
PS-8 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
Tax Treatment
In determining our reporting responsibilities, we intend to treat the notes for U.S. federal income tax purposes as "open transactions" that are not debt instruments, as described in the section entitled "Material U.S. Federal Income Tax Consequences - Tax Consequences to U.S. Holders - Notes Treated as Open Transactions That Are Not Debt Instruments" in the accompanying product supplement no. 4-I. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the notes could be materially and adversely affected.
No statutory, judicial or administrative authority directly addresses the characterization of the notes (or similar instruments) for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper characterization and treatment. Assuming that "open transaction" treatment is respected, subject to the possible application of the "constructive ownership" rules described below, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of the notes at the issue price. However, the IRS or a court may not respect the treatment of the notes as "open transactions," in which case the timing and character of any income or loss on the notes could be materially and adversely affected. For instance, the notes could be treated as contingent payment debt instruments, in which case the gain on your notes would be treated as ordinary income and you would be required to accrue original issue discount on your notes in each taxable year at the "comparable yield," as determined by us, although we will not make any payment with respect to the notes until maturity.
In addition, assuming that "open transaction" treatment is respected, the notes could be treated as "constructive ownership transactions" within the meaning of Section 1260 of the Code, in which case any gain recognized in respect of the notes that would otherwise be long-term capital gain and that was in excess of the "net underlying long-term capital gain" (as defined in Section 1260) would be treated as ordinary income, and a notional interest charge would apply as if that income had accrued for tax purposes at a constant yield over your holding period for the notes. Our special tax counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the notes. Accordingly, U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of "prepaid forward contracts" and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the "constructive ownership" regime described above. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
PS-9 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
in the notes, possibly with retroactive effect. You should review carefully the section entitled "Material U.S. Federal Income Tax Consequences" in the accompanying product supplement and consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including the potential application of the constructive ownership rules, possible alternative treatments and the issues presented by this notice.
Section 871(m) of the Code and Treasury regulations promulgated thereunder ("Section 871(m)") generally impose a 30% withholding tax (unless an income tax treaty applies) on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations. Additionally, a recent IRS notice excludes from the scope of Section 871(m) instruments issued prior to January 1, 2027 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an "Underlying Security"). Based on certain determinations made by us, we expect that Section 871(m) will not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If necessary, further information regarding the potential application of Section 871(m) will be provided in the pricing supplement for the notes. You should consult your tax adviser regarding the potential application of Section 871(m) to the notes.
The Estimated Value of the Notes
The estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates' view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement funding rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. For additional information, see "Selected Risk Considerations - Risks Relating to the Estimated Value and Secondary Market Prices of the Notes - The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate" in this pricing supplement.
The value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not represent future values of the notes and may differ from others' estimates. Different pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.'s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
The estimated value of the notes will be lower than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging
PS-10 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
profits. See "Selected Risk Considerations - Risks Relating to the Estimated Value and Secondary Market Prices of the Notes - The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes" in this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market prices of the notes, see "Risk Factors - Risks Relating to the Estimated Value and Secondary Market Prices of the Notes - Secondary market prices of the notes will be impacted by many economic and market factors" in the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include selling commissions, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See "Selected Risk Considerations - Risks Relating to the Estimated Value and Secondary Market Prices of the Notes - The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period" in this pricing supplement.
Supplemental Use of Proceeds
The notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the notes. See "Hypothetical Payout Profile" and "How the Notes Work" in this pricing supplement for an illustration of the risk-return profile of the notes and "The Basket" in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional Terms Specific to the Notes
You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together with the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes of which these notes are a part, the accompanying prospectus addendum and the more detailed information contained in the accompanying product supplement and the accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the "Risk Factors" sections of the accompanying prospectus supplement and the accompanying product supplement and in Annex A to the accompanying prospectus addendum, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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Product supplement no. 4-I dated April 13, 2023: http://www.sec.gov/Archives/edgar/data/19617/000121390023029539/ea152803_424b2.pdf |
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Underlying supplement no. 1-I dated April 13, 2023: http://www.sec.gov/Archives/edgar/data/19617/000121390023029543/ea151873_424b2.pdf |
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Prospectus supplement and prospectus, each dated April 13, 2023: http://www.sec.gov/Archives/edgar/data/19617/000095010323005751/crt_dp192097-424b2.pdf |
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Prospectus addendum dated June 3, 2024: http://www.sec.gov/Archives/edgar/data/1665650/000095010324007599/dp211753_424b3.htm |
PS-11 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |
Our Central Index Key, or CIK, on the SEC website is 1665650, and JPMorgan Chase & Co.'s CIK is 19617. As used in this pricing supplement, "we," "us" and "our" refer to JPMorgan Financial.
PS-12 | Structured Investments Capped Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares® MSCI India ETF, the iShares® MSCI Japan ETF and the iShares® MSCI EAFE ETF |