Morgan Stanley Issues $750,000 Auto-Callable Structured Notes Linked to S&P Momentum Index

Security Structure and Terms

The securities represent unsecured obligations of Morgan Stanley Finance LLC with an unconditional guarantee from Morgan Stanley. Priced at $1,000 per security, the offering generated $750,000 in aggregate principal amount, with the issuer receiving $714,375 after accounting for agent commissions of $47.50 per security totaling $35,625. The securities were priced on July 24, 2026, and issued on July 29, 2026, with a final maturity date of July 29, 2031. The estimated value at pricing was $897.20 per security, reflecting the embedded cost of the optional features and structural components built into these instruments.

These notes are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program and are distributed by Morgan Stanley & Co. LLC, which serves as the agent. The securities do not provide for regular interest payments in the traditional sense; instead, they feature a contingent coupon mechanism that pays only under specified conditions. The disclosure emphasizes that these are principal-at-risk securities designed for investors willing to accept significant downside exposure in exchange for specific structural protections and potentially enhanced returns.

Contingent Coupon Payment Mechanism

The securities feature a contingent coupon at an annual rate of 12.35%, payable on each coupon payment date only if the closing level of the underlier meets or exceeds the coupon barrier level on the related observation date. If the coupon barrier is not satisfied on any observation date, no interest is paid for that period. However, the structure includes a memory feature: any unpaid contingent coupons accumulate and become payable on a subsequent coupon payment date, but only if the closing level of the underlier meets or exceeds the coupon barrier level on that future date. This memory component allows investors to recover missed coupons rather than forfeiting them entirely, provided the index recovers sufficiently before maturity.

The 12.35% coupon rate represents a potentially above-market yield that reflects both the risks inherent in the structure and the value of the embedded options. Investors accept the risk that coupons may not be paid for extended periods or potentially throughout the entire five-year term if the underlier's performance remains below the coupon barrier. The disclosure does not specify the exact coupon barrier level in the pricing supplement, directing investors to the accompanying product supplement for detailed barrier information. This contingent payment structure fundamentally differs from conventional fixed-income securities and requires investors to monitor the underlier's performance actively.

Automatic Early Redemption Feature and Call Thresholds

The securities incorporate an automatic early redemption feature that activates if the underlier's closing level meets or exceeds the call threshold level of 1,248.91 on any of 49 scheduled redemption determination dates. The first redemption determination date is July 26, 2027, meaning the securities cannot be called prior to this date. If the call condition is satisfied on any redemption determination date, the securities are automatically redeemed on the corresponding early redemption date, with investors receiving the stated principal amount plus the contingent coupon for the current interest period and any previously unpaid contingent coupons. Once automatically redeemed, no further payments are made on the securities.

The redemption determination dates are scheduled monthly (with minor variations) from July 2027 through June 2031, providing multiple opportunities for early redemption throughout the security's life. The call threshold of 1,248.91 represents 100% of the initial level of the underlier, meaning the index must return to its strike level of July 24, 2026 for early redemption to occur. If the underlier does not reach this threshold on any redemption determination date, the securities remain outstanding and continue toward their July 29, 2031 maturity date. This feature creates the potential for limited upside participation if the index appreciates significantly, as investors' gains are capped at the early redemption payment.

Buffer Protection and Maturity Payment Terms

At maturity on July 29, 2031, the payment structure depends on the final level of the underlier relative to the buffer level. If the final level is greater than or equal to the buffer level, investors receive the stated principal amount plus the contingent coupon for the final observation date and any previously unpaid contingent coupons. The buffer provides downside protection by allowing the index to decline without triggering principal loss up to a specified percentage. However, if the final level is less than the buffer level, investors lose 1% of principal for every 1% decline in the underlier beyond the specified buffer amount, meaning losses can be substantial.

The disclosure emphasizes that if the final level is less than the buffer level, the maturity payment "will be less, and may be significantly less, than the stated principal amount of the securities, subject to the minimum payment at maturity." The filing does not disclose the specific buffer percentage in the pricing supplement, directing investors to the accompanying product supplement and index supplement for this critical information. This structure exposes investors to significant principal risk if the S&P U.S. Equity Momentum 40% VT 4% Decrement Index declines substantially by the final observation date of July 24, 2031, regardless of any earlier recovery in the underlier's price.

Underlying Index and Performance Characteristics

The securities track the S&P U.S. Equity Momentum 40% VT 4% Decrement Index, which was developed by S&P Dow Jones Indices LLC in coordination with Morgan Stanley and established on March 14, 2022. The filing indicates that additional information about the underlier's composition, methodology, and historical performance can be found in the accompanying index supplement. The index name suggests it focuses on U.S. equity momentum strategies with a 40% allocation emphasis and incorporates a 4% decrement (annual reduction), which likely reflects fees, adjustments, or structural design elements built into the index calculation. The use of a specialized, less commonly known index distinguishes these securities from those based on broad market benchmarks and introduces additional tracking and performance risks.

Investors receive no direct participation in any appreciation of the underlier beyond the automatic early redemption feature's cap. If the index appreciates significantly but does not exceed the call threshold level on any redemption determination date before maturity, investors do not capture upside gains. Conversely, investors bear full downside risk if the index declines beyond the buffer level by maturity. This asymmetric payoff structure, combined with the momentum-focused nature of the underlying index, creates distinct risk-return characteristics that differ significantly from traditional equity or fixed-income investments.

Pricing, Costs, and Distribution

The securities were priced to the public at $1,000 per security, with selected dealers and their financial advisors receiving fixed sales commissions of $47.50 for each security sold. The total dealer compensation was $35,625 on the $750,000 aggregate issuance, resulting in net proceeds to Morgan Stanley Finance LLC of $714,375. The estimated value of each security on the pricing date of July 24, 2026 was $897.20, a discount of $102.80 from the public offering price, reflecting the embedded cost of the contingent coupon feature, buffer protection, automatic early redemption option, and other structural components. This markdown represents the economic cost to investors of obtaining the structured payoff profile relative to the principal amount invested.

Morgan Stanley & Co. LLC, an affiliate of Morgan Stanley Finance LLC and a wholly owned subsidiary of Morgan Stanley, acts as the agent for this offering. The disclosure notes that selected dealers and their financial advisors will collectively receive the fixed sales commission, with additional information about conflicts of interest and the plan of distribution available in the accompanying product supplement. The relatively modest dealer commission of 4.75% of the public price suggests this offering was distributed through Morgan Stanley's own dealer network rather than through a broad-based dealer syndicate.

Risk Factors and Principal at Risk Designation

The offering document explicitly identifies these as principal-at-risk securities designed for investors willing to accept the risk of receiving no coupons throughout the entire five-year term in exchange for the buffer feature and the opportunity to earn above-market interest rates. The disclosure states clearly that investors must be willing to accept the risk of losing a significant portion of their initial investment. The securities are unsecured obligations of Morgan Stanley Finance LLC, meaning investors have no security interest in or access to any underlying reference asset. All payments depend entirely on the credit of Morgan Stanley and Morgan Stanley Finance LLC, and if either entity defaults, investors could lose some or all of their investment.

These securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality. The filing notes that the securities involve risks not associated with ordinary debt securities and directs investors to the Risk Factors section in the accompanying product supplement for comprehensive risk disclosure. The combination of contingent coupon payments, buffer-limited downside protection, principal exposure, credit risk, and underlier performance risk creates a complex risk profile that requires careful consideration from investors.

Legal and Regulatory Framework

The securities were filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and are issued under Registration Statement Nos. 333-293641 and 333-293641-01. The pricing supplement is dated July 24, 2026, and was filed on July 28, 2026. The complete terms and conditions are described in the accompanying product supplement dated April 8, 2026, the index supplement dated April 8, 2026, the tax supplement dated April 8, 2026, and the base prospectus dated April 8, 2026. These documents are referenced as hyperlinks in the offering materials and collectively form the complete offering documentation.

The filing includes the standard regulatory disclaimer that the Securities and Exchange Commission and state securities regulators have not approved or disapproved the securities or determined whether the pricing supplement or accompanying documents are truthful and complete. The document notes that any representation to the contrary is a criminal offense. Investors are advised to review the complete offering documentation, including all risk factors and detailed terms, before making an investment decision. The regulatory framework requires comprehensive disclosure of all material terms, risks, and features of the securities.

Investment Considerations for Potential Investors

These structured securities are designed for sophisticated investors with specific risk tolerance and return objectives who understand the mechanics of contingent coupons, buffer-protected downside, and automatic early redemption features. The 12.35% annual contingent coupon must be weighed against the probability that coupon barrier conditions may not be met, potentially resulting in zero coupon payments for extended periods. The automatic early redemption feature caps potential upside if the underlier appreciates significantly, limiting the benefit of index gains beyond the 100% call threshold level. Investors seeking direct equity exposure or those preferring traditional fixed-income characteristics would likely find these securities unsuitable.

The estimated value of $897.20 per security compared to the $1,000 offering price represents the embedded cost of the structured components and reflects current market pricing for the risk-reward profile. Investors should carefully review whether the contingent coupon rate and buffer protection adequately compensate for the principal risk, coupon uncertainty, and credit exposure to Morgan Stanley. The underlier's momentum-based methodology and the 4% decrement factor may introduce additional volatility and performance characteristics distinct from broad market indices. Investors contemplating purchase of these securities should consult with a financial advisor to ensure alignment with their investment objectives and risk tolerance.