Morgan Stanley Finance Issues $455 Million Buffered Jump Securities Linked to S&P 500

Structure and Terms of the Buffered Jump Securities

Morgan Stanley Finance LLC has structured these securities with multiple payment scenarios designed to appeal to investors seeking principal protection combined with upside potential. The securities establish an initial level of 7,411.98 based on the S&P 500 Index closing level on the strike date of July 24, 2026. Investors who hold securities that are not automatically redeemed prior to maturity will receive differentiated payments depending on where the final level of the index settles at maturity. If the final level is greater than or equal to the call threshold level of 7,411.98, investors receive $1,280.50 per security, representing a fixed positive return. This payment structure provides meaningful upside participation while capping the maximum return investors can achieve through the securities.

The buffer mechanism operates to protect investors from the full downside impact of index declines. When the final level falls below the call threshold but remains at or above the buffer level of 6,300.183, investors receive the full stated principal amount of $1,000 per security. This buffer level represents 85 percent of the initial index level, meaning the S&P 500 would need to decline by 15 percent or more from the strike date for investors to experience losses. The filing indicates that investors bear all costs associated with issuing, selling, structuring and hedging the securities, as reflected in the estimated value of $985.80 per security on the pricing date, compared to the $1,000 issue price.

Auto-Callable Feature and Early Redemption Mechanics

The securities incorporate an auto-callable feature that allows for early redemption on specified determination dates if the S&P 500 Index meets or exceeds the call threshold level. The first determination date is set for July 28, 2027, marking the earliest point at which automatic redemption can occur. The filing states that a second determination date occurs on July 24, 2028, with a final determination date on July 24, 2029. If the index closes at or above the call threshold level on any determination date other than the final determination date, the securities will be automatically redeemed on the corresponding early redemption date without further option for investors to retain the securities.

The early redemption payments escalate over the holding period, offering approximately 9.35 percent annualized returns. Specifically, if redemption occurs on the first determination date of July 28, 2027, investors receive $1,093.50 per security. Should the securities remain outstanding until the second determination date on July 24, 2028, the early redemption payment increases to $1,187.00 per security. This escalating payment structure incentivizes investors to accept early redemption rather than hope for stronger market performance. Once securities are automatically redeemed, no further payments will be made, and the investment terminates regardless of subsequent index performance.

Principal Risk and Loss Scenarios

The filing emphasizes that investors face substantial principal risk with these securities, particularly if the S&P 500 Index experiences significant declines from the strike date level. If the final level at maturity falls below the buffer level of 6,300.183, investors will experience losses calculated as one percent for every one percent decline in the index beyond the buffer amount. For example, if the index declines to 6,200 from the initial level of 7,411.98, investors would lose approximately 1.6 percent of their principal. The filing states that under these circumstances, the payment at maturity will be less, and may be significantly less, than the stated principal amount, subject to the minimum payment at maturity of 15 percent of the stated principal amount.

The disclosure notes that these securities are principal at risk securities designed for investors willing to risk their principal and forgo current income in exchange for the buffer feature and the possibility of receiving enhanced payments. Investors cannot participate in any appreciation of the underlying index beyond the call threshold level, meaning the securities cap upside gains while providing limited downside protection. The filing underscores that investors in the securities must be willing to accept the risk of losing a significant portion of their initial investment. Additionally, all payments depend on Morgan Stanley's creditworthiness, as the securities represent unsecured obligations with no security interest in any underlying assets.

Issuance Details and Distribution Methodology

Morgan Stanley Finance LLC issued these securities with a total aggregate principal amount of $455 million, comprised of 455,000 securities at $1,000 per security. The pricing date was July 24, 2026, with an original issue date of July 29, 2026, representing a five-day settlement period typical for structured products. Morgan Stanley & Co. LLC, an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, acts as the agent for distribution. The filing indicates that MS & Co. expects to purchase all securities from MSFL at $995 per security and sell them to an unaffiliated dealer at the same price for further sale to fee-based advisory accounts at the public price of $1,000 per security.

The distribution is limited to investors purchasing securities in fee-based advisory accounts, which typically exclude retail clients purchasing through commission-based arrangements. Agent's commissions and fees total $2,275, or $5 per security, with proceeds to Morgan Stanley Finance LLC calculated at $452,725 total, or $995 per security. The filing states that MS & Co. will not receive a sales commission with respect to the securities, as the distribution mechanism relies on the markup between the dealer purchase price and the public offering price. This structure reflects the complex distribution requirements for principal at risk securities and the regulatory framework governing sales through advisory channels.

Valuation and Estimated Security Value

The filing discloses that the estimated value of the securities on the pricing date is $985.80 per security, a discount of $14.20 from the $1,000 issue price. This difference represents the economic cost to investors of the embedded options and structural features incorporated into the securities, including the auto-callable feature, the buffer protection mechanism, and the capped upside return. The disclosure states that the original issue price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by investors. This cost structure means that investors immediately face a 1.42 percent loss in value at issuance before considering any market movements in the S&P 500 Index.

The valuation methodology, as described in the filing, takes into account that the securities comprise both a debt component and a performance-based component linked to the underlier. Morgan Stanley determined the estimated value using its own pricing and valuation models, though the filing does not disclose the specific mathematical models or assumptions used in the calculation. This estimated value provides a reference point for investors to understand the initial economic cost of the structured features relative to the par value of $1,000 per security.

Index Mechanics and Buffer Protection Parameters

The securities track the S&P 500 Index, one of the most widely followed equity benchmarks representing large-capitalization U.S. companies. The initial level of the index used for calculating returns and buffer protection is 7,411.98, the closing level on the strike date of July 24, 2026. The buffer level is established at 6,300.183, which represents exactly 85 percent of the initial level. This 15 percent buffer means that the S&P 500 Index can decline by approximately 1,111.80 index points from the initial level before investors begin to experience losses beyond the minimum payment threshold. The performance factor used to calculate returns at maturity is determined by dividing the final level by the initial level, providing a straightforward mathematical relationship between index movement and investment outcome.

The filing establishes clear mathematical relationships governing investor outcomes across all market scenarios. If the index appreciates from the initial level of 7,411.98, investors benefit through higher early redemption payments or enhanced maturity payments, but gains are capped at the call threshold level of 7,411.98, effectively preventing participation in gains beyond the point at which early redemption becomes likely. If the index declines modestly to above 6,300.183, investors recover their full principal amount at maturity. Only when the index falls below the buffer level do investors face fractional losses, with the severity of losses increasing proportionally as the index falls further below the buffer threshold.

Timing of Determination Dates and Maturity

The securities establish three critical dates for assessing the S&P 500 Index level and determining investor outcomes. The first determination date occurs on July 28, 2027, one year and four days after the strike date, marking the earliest point at which automatic early redemption can occur. The filing states that under no circumstances will the securities be redeemed prior to the first determination date. The second determination date is set for July 24, 2028, exactly two years after the strike date and pricing date. If the securities remain outstanding through both early determination dates without triggering automatic redemption, the final determination date on July 24, 2029 will establish the final level used to calculate maturity payments, with maturity occurring three days later on July 27, 2029.

All determination dates are subject to postponement for non-trading days and certain market disruption events as described in the product supplement. This language indicates that Morgan Stanley retains discretion to adjust timing if determination dates fall on weekends, holidays, or days when the underlying index is not trading. The three-year timeline from strike date to maturity provides investors with a defined holding period, though the auto-callable feature offers potential for earlier termination if the index appreciates sufficiently. The spacing of determination dates at approximately annual intervals allows multiple opportunities for the securities to be called away at enhanced returns.

Credit Risk and Guarantee Framework

Morgan Stanley Finance LLC issues these securities as unsecured obligations fully and unconditionally guaranteed by Morgan Stanley. The filing emphasizes that all payments on the securities, whether through early redemption or maturity payments, depend on the creditworthiness and financial condition of Morgan Stanley. If Morgan Stanley defaults on its obligations, investors could lose some or all of their investment, as the securities have no security interest in any underlying reference assets or collateral. The filing states explicitly that the securities are not secured obligations and investors will not have any security interest in or access to any underlying reference asset or assets. This credit dependency means investors' returns depend not only on S&P 500 Index performance but also on Morgan Stanley's ability and willingness to pay at the specified times.

The guarantee from Morgan Stanley extends to both the principal repayment and the performance-linked payments throughout the life of the securities. The guarantee structure is unusual in that it fully stands behind MSFL's obligations as the nominal issuer, making Morgan Stanley the practical credit counterparty for all investment decisions. Investors should evaluate both the index-linked performance features and Morgan Stanley's credit profile before committing capital to these securities. The filing notes that 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.

Investor Suitability and Risk Warnings

The filing identifies these securities as appropriate for investors willing to risk their principal and forgo current income in exchange for the buffer feature and the possibility of receiving early redemption payments or maturity payments exceeding the stated principal amount. The disclosure indicates that investors will not participate in any appreciation of the underlier beyond the call threshold level, effectively capping the maximum return at approximately 28.05 percent over three years if the index appreciates significantly and early redemption does not occur. The securities provide no regular interest payments, making them unsuitable for income-focused investors seeking ongoing cash flows. The filing emphasizes multiple times that investors in the securities must be willing to accept the risk of losing a significant portion of their initial investment.

The product supplement, index supplement, tax supplement and prospectus referenced in the filing contain additional terms and risk factors relevant to investors' decision-making process. The filing directs investors to read these comprehensive documents together with the pricing supplement to fully understand the securities' characteristics, risks, and mechanics. The disclosure also notes that the Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if the pricing supplement and accompanying documents are truthful or complete. Investors should conduct independent due diligence and consult with financial advisors before committing capital to these complex structured products.