Morgan Stanley Finance Introduces Contingent Income Auto-Callable Securities Linked to S&P 500 and Technology Sector ETF

Product Structure and Dual Underlier Design

Morgan Stanley Finance LLC has launched Contingent Income Auto-Callable Securities based on the worst-performing of two market indices: the S&P 500 Index and the State Street Technology Select Sector SPDR ETF. The securities are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program and are fully and unconditionally guaranteed by Morgan Stanley. The stated principal amount per security is $1,000, with an original issue date of August 5, 2026, following a pricing date of July 31, 2026. The strike date for establishing initial levels is also July 31, 2026, with the final observation date set for August 31, 2027, subject to postponement for non-trading days and certain market disruption events.

The dual-underlier structure means that performance is determined by the worst-performing of the two market benchmarks rather than an average or combined metric. This approach concentrates downside risk, as a significant decline in either the S&P 500 Index or the Technology Select Sector SPDR ETF will trigger coupon withholding or principal loss provisions. The disclosure explicitly states that the fact that the securities are linked to more than one underlier does not provide asset diversification benefits; instead, a decline in either underlier beyond specified thresholds will adversely affect returns even if the other underlier has appreciated or declined less significantly.

Contingent Coupon Mechanics and Payment Conditions

The securities will pay a contingent coupon at an annual rate of 13.00% on each coupon payment date, but only if the closing level of each underlier is greater than or equal to its coupon barrier level on the related observation date. The coupon barrier level is set at 70% of the initial level for both the S&P 500 Index and the Technology Select Sector SPDR ETF. If on any observation date the closing level of either underlier falls below its coupon barrier level, no coupon will be paid with respect to the applicable interest period. This all-or-nothing coupon structure means that investors receive either the full contingent coupon or zero interest for a given period, with no partial or scaled coupon payments.

Coupon payment dates are tied to observation dates throughout the term of the securities, with the final coupon payment (if payable) to be made on the maturity date of September 3, 2027. If any coupon payment date is not a business day, the coupon payment, if any, will be made on the next succeeding business day with no adjustment to the amount of the coupon paid on that succeeding business day. The observation dates and corresponding coupon payment dates are specified in the disclosure, and all observation dates are subject to postponement for non-trading days and certain market disruption events. The early coupon withholding mechanism creates a scenario where investors could receive no interest payments over the entire term of the securities if either underlier breaches its coupon barrier level at any observation date.

Automatic Early Redemption and Call Threshold Provisions

The securities feature an automatic early redemption mechanism that becomes operative on the first redemption determination date of January 29, 2027. Under no circumstances will the securities be redeemed prior to this date. On each subsequent redemption determination date (scheduled for January 29, February 26, March 31, April 30, May 28, June 30, and July 30, 2027), the securities will be automatically redeemed if the closing level of each underlier is greater than or equal to its call threshold level. The call threshold level is set at 100% of the initial level for both the S&P 500 Index and the Technology Select Sector SPDR ETF.

When automatic early redemption occurs, investors receive an early redemption payment equal to the stated principal amount plus the contingent coupon with respect to the related interest period. Once the securities have been automatically redeemed, no further payments will be made on the securities. Early redemption dates are scheduled for February 3, March 3, April 5, May 5, June 3, July 6, and August 4, 2027. Critically, the securities will not be redeemed on any early redemption date if the closing level of either underlier is less than its call threshold level on the related redemption determination date, meaning that only modest appreciation (or maintenance of initial levels) in both benchmarks will trigger the automatic redemption feature.

Principal at Risk and Downside Threshold Mechanics

If the securities have not been automatically redeemed prior to maturity and the final level of each underlier is greater than or equal to its downside threshold level, investors will receive the stated principal amount at maturity in addition to the contingent coupon with respect to the final observation date, if payable. However, if the final level of either underlier is less than its downside threshold level, investors will experience principal loss on a dollar-for-dollar basis tied to the worst-performing underlier. Specifically, investors will lose 1% for every 1% decline in the level of the worst performing underlier over the term of the securities. Under these circumstances, the payment at maturity will be significantly less than the stated principal amount and could be zero if the worst-performing underlier declines by 100% or more.

The disclosure explicitly states that investors in the securities must be willing to accept the risk of losing their entire initial investment based on the performance of either underlier. The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Additionally, investors will not participate in any appreciation of either underlier, meaning that even if both benchmarks experience substantial gains, investors are capped at receiving their principal back plus any contingent coupons earned (if both underliers remained above their coupon barriers). This asymmetric payoff structure creates a scenario where the maximum gain is limited to the contingent coupon payments and principal return, while maximum loss is equivalent to the entire initial investment.

Pricing and Estimated Value Considerations

The price to public for each security is $1,000 per security, which is also the stated principal amount. Morgan Stanley & Co., an affiliate of Morgan Stanley Finance LLC and a wholly-owned subsidiary of Morgan Stanley, acts as agent for the offering. The disclosure indicates that Morgan Stanley & Co. expects to sell all of the securities it purchases from Morgan Stanley Finance LLC to an unaffiliated dealer at a specified price per security, for further sale to fee-based advisory accounts at the price to public of $1,000 per security. Morgan Stanley & Co. will not receive a sales commission with respect to the securities under this arrangement.

The estimated value on the pricing date is approximately $984.80 per security, or within $35.00 of that estimate. This valuation represents the theoretical fair value of the securities accounting for the embedded options, including the automatic early redemption feature and the contingent coupon structure. The difference between the issue price of $1,000 and the estimated value of $984.80 reflects the value of the issuer's economic position in the structured investment. The disclosure notes that the actual agent's commissions and fees, as well as proceeds to the issuer, are subject to specific pricing terms that are not fully disclosed in this preliminary supplement, as indicated by blank fields in the pricing table.

Distribution, Investor Eligibility, and Conflicts of Interest

The securities will be sold only to investors purchasing the securities in fee-based advisory accounts. This restriction limits the potential purchaser base to clients of financial advisors who operate under fee-based compensation structures rather than commission-based models. Morgan Stanley & Co., as the agent, will distribute the securities through an unaffiliated dealer to these qualified fee-based advisory accounts. The involvement of an unaffiliated dealer in the distribution chain introduces a potential layer between Morgan Stanley entities and end investors.

The disclosure acknowledges conflicts of interest inherent in this offering structure, as Morgan Stanley Finance LLC serves as the issuer, Morgan Stanley serves as the guarantor, and Morgan Stanley & Co. serves as the distribution agent. The supplemental information regarding the plan of distribution and conflicts of interest is addressed in the accompanying product supplement. The securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed by, a bank, despite the Morgan Stanley guarantee that applies to the obligation itself.

Credit Risk and Guarantee Structure

All payments on the securities are subject to the credit risk of Morgan Stanley Finance LLC and Morgan Stanley's guarantee. The disclosure explicitly states that if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. These securities are unsecured obligations of Morgan Stanley Finance LLC, meaning investors will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets. The guarantee by Morgan Stanley is full and unconditional, but it does not eliminate Morgan Stanley's own credit risk or the risk that Morgan Stanley's financial condition could deteriorate during the life of the securities.

The principal-at-risk nature of these securities means that investors face dual sources of loss risk: performance risk tied to the underlying indices and credit risk tied to Morgan Stanley's ability to meet its obligations. Unlike traditional debt securities issued by investment-grade entities, these structured notes contain embedded derivatives and contingent payment mechanisms that increase complexity and potential loss scenarios. Investors must evaluate not only the likelihood that the underlying benchmarks will decline but also the probability and severity of potential default by Morgan Stanley or Morgan Stanley Finance LLC over the approximately 13-month term of the securities.

Risk Factors and Investment Suitability Considerations

The disclosure emphasizes that the securities are designed for investors who seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of losing a significant portion or all of their principal and the risk of receiving no coupons over the entire term of the securities. The 13.00% annual contingent coupon rate is substantially higher than prevailing market rates for unsecured corporate debt, which reflects the embedded risks and contingencies associated with payment. The disclosure makes clear that this premium coupon rate is compensation for accepting principal-at-risk exposure and the possibility that no coupon payments will be received if either underlying index falls below its coupon barrier level.

Investors should recognize that the securities are not appropriate for capital preservation strategies or for portfolios requiring steady income streams. The all-or-nothing coupon mechanism means that missing even one coupon payment due to a breach of the coupon barrier level by either underlier eliminates that period's income entirely. The worst-performing underlier structure amplifies downside risk, as weakness in a single benchmark—whether the broad S&P 500 Index or the narrower Technology Select Sector SPDR ETF—can trigger adverse outcomes for the entire position. The disclosure in the risk factors section beginning on page 9 of the full product supplement provides additional detail on these and other investment risks associated with the securities.

Regulatory Status and Information Sources

The securities are registered under Registration Statement Numbers 333-293641 and 333-293641-01, with this preliminary pricing supplement filed pursuant to Rule 424(b)(2) on July 17, 2026. The disclosure clarifies that the Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if the preliminary pricing supplement, product supplement, index supplement, tax supplement, and prospectus are truthful or complete. Any representation to the contrary is a criminal offense. This is a preliminary pricing supplement, meaning that certain pricing terms remain to be finalized at the time of actual pricing and issuance.

Investors and financial advisors should review the accompanying product supplement dated April 8, 2026, the index supplement dated April 8, 2026, the tax supplement dated April 8, 2026, and the prospectus dated April 8, 2026, in addition to this preliminary pricing supplement. The complete terms of the securities, including detailed risk factors and additional terms, are contained in these accompanying documents. Additional information regarding the securities can be found in sections titled "Additional Terms of the Securities" and "Additional Information About the Securities" at the end of the preliminary pricing supplement. The disclosure documents provide investors with comprehensive information necessary to evaluate the securities before making a purchase decision.