Bank of Montreal Issues Auto-Callable Equity-Linked Securities Tied to Broadcom, Deere, and Meta Stock Performance

Security Structure and Three-Stock Linkage Design

Bank of Montreal's newly issued securities represent a complex structured product linking returns to the common stock of Broadcom Inc., the common stock of Deere & Company, and the Class A common stock of Meta Platforms Inc. Rather than tracking each stock independently, the securities' performance depends entirely on the lowest-performing stock among the three underliers on each calculation day. This "worst-of" structure means investors benefit only from the performance of the weakest stock in the basket, creating concentrated downside exposure to whichever equity declines the most relative to its starting value.

The pricing supplement discloses that on the pricing date of July 27, 2026, Broadcom Inc. common stock had a starting value of $383.22, Deere & Company common stock had a starting value of $625.02, and Meta Platforms Inc. Class A common stock had a starting value of $593.87. These starting values serve as the baseline against which all subsequent performance measurements are calculated. Investors will not benefit from appreciation of any underlier beyond the starting value and will receive no dividends on any of the three stocks, regardless of their actual performance during the security's term.

Contingent Coupon Mechanism and Memory Feature

The securities provide for quarterly contingent coupon payments at an annual rate of 22.80%, subject to a critical condition: the lowest-performing underlier's closing value must be greater than or equal to its coupon threshold value on the relevant calculation day. The disclosure specifies that the coupon threshold value for each underlier is equal to 60% of its starting value. This means the contingent coupon will be paid only if the weakest-performing stock has declined no more than 40% from its starting price on the relevant quarterly measurement date.

A significant feature of these securities is the "memory" provision for unpaid contingent coupons. If the lowest-performing underlier closes below its coupon threshold on one or more calculation days—meaning no coupon is paid—but subsequently closes at or above the coupon threshold on a later calculation day, the investor receives both the current quarter's contingent coupon payment plus all previously unpaid contingent coupon payments on that later contingent coupon payment date. However, if the lowest-performing underlier remains below the coupon threshold value on every calculation day throughout the entire term of the securities, no contingent coupons will be paid at all. The disclosure explicitly warns that investors could receive zero contingent coupon payments if the weakest stock never recovers to above 60% of its starting value.

Automatic Call Provisions and Early Redemption Trigger

Bank of Montreal has structured the securities with automatic call features designed to potentially terminate the investment before the stated maturity date of August 1, 2029. If on any of the quarterly calculation days scheduled from October 2026 through April 2029 (inclusive), the lowest-performing underlier's closing value is greater than or equal to its call threshold value, the securities will be automatically called. The disclosure defines the call threshold value for each underlier as 95% of its starting value. This means automatic redemption occurs if even the weakest-performing stock has declined no more than 5% from its starting price.

Upon automatic call, investors receive the face amount of $1,000 per security plus a final contingent coupon payment and any previously unpaid contingent coupon payments accrued under the memory feature. The automatic call provision effectively caps the investor's upside while maintaining full downside exposure below the coupon threshold, creating an asymmetric payoff structure favoring the issuer. Investors should note that the securities are not listed for exchange trading and are designed to be held to maturity or until automatic call, limiting liquidity and exit flexibility during the three-year term.

Principal at Risk and Downside Exposure Framework

The pricing supplement prominently discloses that these securities do not provide for fixed repayment of principal at stated maturity. Instead, principal repayment is contingent on the performance of the lowest-performing underlier. If the securities are not automatically called prior to maturity, investors will receive the full face amount of $1,000 at stated maturity only if the lowest-performing underlier's closing value on the final calculation day is greater than or equal to its downside threshold value. The disclosure specifies that the downside threshold value for each underlier is 60% of its starting value, identical to the coupon threshold.

If the lowest-performing underlier closes below 60% of its starting value on the final calculation day and the securities have not been called, investors will experience a loss greater than 40% of their principal investment and potentially lose all invested capital. The filing explicitly warns that investors will have full downside exposure to the lowest-performing underlier "from its starting value" if its closing value falls below the downside threshold. This language indicates that losses can exceed 40%—potentially reaching the full investment amount if the weakest stock declines substantially. The disclosure emphasizes that investors will not participate in any appreciation of any underlier and receive no dividends, creating a situation where downside risk is asymmetrically large relative to upside participation.

Estimated Value and Pricing Methodology

The pricing supplement discloses that on the pricing date, the estimated initial value of the securities is $957.95 per security, compared to the original offering price of $1,000 per security. This $42.05 discount (4.205% below par) reflects the estimated value of the contingent features, automatic call provisions, and embedded options written into the security structure. The filing notes that "the actual value of the securities at any time will reflect many factors and cannot be predicted with accuracy," acknowledging the complexity of valuing instruments with multiple embedded derivatives and path-dependent features.

Wells Fargo Securities, LLC acted as the principal agent for distribution, receiving an agent discount of $23.25 per security, or $55,381.50 on the total offering. Bank of Montreal affiliate BMO Capital Markets Corp. may pay additional marketing fees of up to $3.00 per security to selected securities dealers. These pricing and fee disclosures establish that net proceeds to Bank of Montreal from the offering were $976.75 per security, or $2,326,618.50 in aggregate on the $2.382 million total original offering price.

Credit Risk and Issuer-Dependent Repayment

All payments on the securities—including contingent coupons, principal, and any automatic call redemption amounts—are subject to the credit risk of Bank of Montreal. The disclosure explicitly states that investors "will have no ability to pursue any Underlier for payment," meaning Broadcom Inc., Deere & Company, and Meta Platforms Inc. are not liable for any payments regardless of their stock performance. If Bank of Montreal defaults on its obligations, investors could lose some or all of their investment. The securities are unsecured obligations of the bank and are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation, or any other governmental agency.

The filing further clarifies that the securities are not "bail-inable" notes and are not subject to conversion into Bank of Montreal's common shares or the common shares of any affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act. This distinction is material for Canadian regulatory purposes, indicating that the securities will not be automatically converted during any regulatory intervention or bank resolution process. Investors are entirely dependent on Bank of Montreal's ability and willingness to meet all payment obligations throughout the security's term.

Complex Features and Risk Considerations

The pricing supplement explicitly acknowledges that "the securities have complex features and investing in the securities involves risks not associated with an investment in conventional debt securities." The disclosure directs investors to a "Selected Risk Considerations" section beginning on page PRS-10 of the pricing supplement and to "Risk Factors" sections in the accompanying product supplement, prospectus supplement, and prospectus. The filing indicates these risk disclosures occupy substantial portions of the offering documents, reflecting the multifaceted dangers inherent in structured equity-linked products.

Investors should understand that the "worst-of" structure creates disproportionate risk concentration. Even if two of the three underliers perform well, poor performance by a single stock will determine the investor's entire return. For example, if Broadcom and Meta stock prices rise 20% while Deere stock falls 50%, the investor receives returns based only on Deere's decline. The contingent nature of coupon payments, combined with the automatic call feature and potential principal loss, creates multiple layers of complexity that make these securities unsuitable for investors seeking predictable, stable income or capital preservation.

Offering Details and Issuance Timeline

Bank of Montreal priced these securities on July 27, 2026, with an issue date of July 30, 2026, and a stated maturity date of August 1, 2029. The offering totaled 2,382 securities with a face amount of $1,000 each, representing $2.382 million in aggregate principal. The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relates to Registration Statement No. 333-285508. Wells Fargo Securities, LLC acted as the sole distribution agent and principal.

The securities form part of Bank of Montreal's Senior Medium-Term Notes, Series K program for Equity Linked Securities and Market Linked Securities. The offering documentation includes a pricing supplement dated July 27, 2026, cross-referenced to a Product Supplement No. WF1 dated March 25, 2025, a Prospectus Supplement dated March 25, 2025, and a Prospectus dated March 25, 2025. This multi-layered documentation structure is typical for complex structured products, with investors required to review multiple documents to understand the full terms and conditions governing their investment.

Quarterly Calculation Schedule and Investor Monitoring Requirements

The securities incorporate quarterly calculation days beginning in October 2026 through April 2029 (inclusive) for purposes of determining automatic call triggers, contingent coupon payments, and the memory feature. On each of these calculation dates, Bank of Montreal will measure the closing value of each of the three underliers and identify which has performed the worst relative to its starting value. Investors must monitor these quarterly measurement points to understand whether contingent coupon payments will be received, whether automatic call conditions have been met, and how the memory feature applies to any previously unpaid coupons.

The lack of exchange listing for these securities means investors cannot easily sell them in a secondary market if circumstances change. The filing states the securities are "designed to be held to maturity or automatic call," indicating limited liquidity and exit opportunities. Investors considering this product must assess their ability and willingness to maintain the position for the full three-year term or until automatic call occurs, without reliable access to a liquid trading market. The quarterly calculation schedule requires ongoing attention and understanding of how each underlier's performance relative to the other two affects the investor's returns on each measurement date.