Morgan Stanley Launches Jump Securities with Auto-Callable Feature Backed by Three Major Market Indices

Structure and Design of the Jump Securities Offering

Morgan Stanley Finance LLC's structured investment product represents a three-index linked security designed to provide enhanced upside participation if performance conditions are met, coupled with defined downside risk management. The securities are issued with a stated principal amount of $1,000 per security and are unconditionally guaranteed by Morgan Stanley, the parent company. The filing indicates that these notes are part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program and are registered under Securities and Exchange Commission Registration Statement Nos. 333-293641 and 333-293641-01.

The product is structured as a "worst-of" security, meaning the payment at maturity depends on the performance of whichever of the three underliers performs least favorably over the investment period. The underliers include the Dow Jones Industrial Average Index, the Russell 2000 Index, and the State Street Technology Select Sector SPDR ETF. This worst-performing approach means that appreciation in the strongest-performing index does not offset weakness in the others. The disclosure emphasizes that multiple underliers do not provide asset diversification benefits; rather, a decline in any single underlier beyond designated thresholds will negatively affect investor returns regardless of performance by the other two underliers.

Automatic Early Redemption and Acceleration Feature

The securities incorporate an automatic call feature that allows for early redemption if specified conditions are satisfied on the first determination date of August 19, 2027. According to the filing, if the closing level of each of the three underliers equals or exceeds its call threshold level—set at 100% of its initial level—on that date, the securities will be automatically redeemed for an early redemption payment of $1,245 per security on August 24, 2027. This represents a 24.5% return on the stated principal amount if the early redemption is triggered, provided all three indices meet their thresholds simultaneously.

Once the securities are automatically redeemed prior to maturity, no further payments will be made on the investment. The filing clarifies that investors have no discretion regarding early redemption; the feature operates automatically if conditions are met. The first determination date is subject to postponement in the event of non-trading days or certain market disruption events, as defined in the accompanying product supplement. This acceleration feature rewards investors if all three market segments included in the security perform at or above their baseline levels within approximately one year from the original issue date.

Maturity Payment Scenarios and Principal Risk Framework

The disclosure outlines three distinct payment scenarios that may occur at maturity on August 17, 2029, depending on how the worst-performing underlier performs relative to its initial level and downside threshold. If the securities have not been called early and the final level of each underlier is greater than its initial level, investors receive the stated principal amount plus an upside payment calculated using a 175% participation rate applied to the worst-performing underlier's percentage change. This means that investors capture 175% of the upside appreciation in the weakest-performing index, allowing for enhanced gains in favorable market conditions.

In the second scenario, if the final level of any underlier is equal to or less than its initial level, but all three underliers remain above their downside threshold level of 60% of initial value, investors receive only the stated principal amount with no additional upside payment. The third and most adverse scenario occurs if the final level of any underlier falls below its 60% downside threshold. In this case, investors receive a payment equal to the stated principal amount multiplied by the performance factor of the worst-performing underlier. The filing explicitly states that under these circumstances, the payment at maturity will be significantly less than the stated principal amount and could be zero, representing total loss of principal. This structure means that for every 1% decline of the worst-performing underlier below the 60% threshold, investors lose 1% of their initial investment amount.

Pricing and Estimated Value of the Securities

The securities are issued at a price to public of $1,000 per security on the pricing date of August 14, 2026, with original issue date of August 19, 2026. However, the filing discloses that the estimated value on the pricing date is approximately $959.00 per security, or within $45.00 of that estimate. This estimated value represents the estimated fair value of the securities taking into account the various embedded features and risks, which differs materially from the issue price due to embedded options, credit risk, and other factors that reduce the intrinsic value compared to the face amount.

The filing indicates that specific commission and fee information, including the agent's commissions and proceeds to the issuer, contained blank values in the preliminary pricing supplement, indicating that these figures had not been finalized at the time of the July 28, 2026 filing date. The disclosure notes that selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission for each security sold, with MS & Co. potentially paying a third-party data analytics provider a fee of $0.50 per security sold at the request of another dealer participant. Morgan Stanley explicitly disclaims representations and warranties regarding the analytics and disclaims liability relating to their use.

Credit Risk and Guarantee Structure

The securities are unsecured obligations of Morgan Stanley Finance LLC with a full and unconditional guarantee from Morgan Stanley, the parent holding company. The filing emphasizes that all payments on the securities are subject to Morgan Stanley's credit risk, meaning that if the parent company defaults on its obligations, investors could lose some or all of their investment. 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 guarantee structure means investors rely entirely on the creditworthiness of Morgan Stanley as the guarantor rather than on collateral or segregated assets backing the investment.

The disclosure explicitly states 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, nor are they obligations of or guaranteed by a bank. This language is important for investors to understand that traditional bank deposit protections do not apply to these securities. The full and unconditional guarantee by Morgan Stanley is the sole credit protection available to investors in this offering.

Key Dates and Determination Mechanics

The strike date and pricing date are both August 14, 2026, with the original issue date set for August 19, 2026. The first determination date for the early redemption feature is August 19, 2027, approximately one year after issuance, subject to postponement for non-trading days and certain market disruption events. The early redemption date, if the call is triggered, would be August 24, 2027. The final determination date for maturity payment calculation is August 14, 2029, also subject to postponement for non-trading days and market disruption events, with the actual maturity date and final payment occurring on August 17, 2029. These dates span approximately three years from original issue to final maturity.

The initial levels for each underlier are set as the closing level on the strike date of August 14, 2026. The final level for payment calculation purposes is the closing level on the final determination date of August 14, 2029. These levels, combined with the call threshold level of 100% for all three underliers and the downside threshold level of 60% for all three underliers, form the basis for all payment calculations. The filing indicates that specific numerical values for these levels would be determined on the strike date and are not disclosed in the preliminary pricing supplement.

Participation Rate and Upside Payment Mechanics

The participation rate embedded in these securities is 175%, meaning that investors capture 175% of the percentage appreciation of the worst-performing underlier if maturity payment conditions are met. The upside payment, when applicable, is calculated as the stated principal amount multiplied by the participation rate multiplied by the underlier percent change of the worst-performing underlier. For example, if the worst-performing underlier appreciated 10% from its initial level to its final level, the upside payment would be $1,000 × 1.75 × 0.10, or $175, for a total maturity payment of $1,175 per security.

The underlier percent change is defined as (final level minus initial level) divided by initial level, expressed as a percentage. This calculation applies only to the worst-performing of the three underliers, regardless of how the other two perform. The 175% participation rate provides enhanced upside exposure compared to a direct investment in any single index, allowing investors to benefit more substantially from market appreciation if the worst-performing index still finishes above its initial level. However, this enhanced participation comes with the associated risk of principal loss if the worst-performing underlier declines below the 60% threshold.

Investor Suitability and Risk Considerations

The filing emphasizes that these securities are designed for investors who are willing to risk their principal and forgo current income in exchange for the possibility of receiving an early redemption payment or payment at maturity that exceeds the stated principal amount. 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 any underlier, particularly the worst performer. This risk profile is fundamentally different from traditional fixed-income securities that prioritize principal return and regular interest payments.

The preliminary pricing supplement notes that the securities involve risks not associated with an investment in ordinary debt securities and references risk factors beginning on page 7 of the disclosure document. The fact that the estimated value on the pricing date is approximately $959.00 per security, or within $45.00 of that estimate, while the issue price is $1,000 per security, reflects the value reduction attributable to the embedded features, credit risk, and other pricing factors. Investors should read the full risk factors section and accompanying product supplement, index supplement, tax supplement, and prospectus before making an investment decision.

Regulatory Status and SEC Compliance

The securities are filed pursuant to Securities and Exchange Commission Rule 424(b)(2) and are registered under SEC Registration Statement Nos. 333-293641 and 333-293641-01. The preliminary pricing supplement is dated July 28, 2026, and is marked as preliminary, indicating that final terms and pricing information had not been finalized at the time of filing. The disclosure includes standard SEC disclaimers stating that the Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if the document or accompanying materials are truthful or complete, with any representation to the contrary constituting a criminal offense.

The securities are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, providing a framework for this and future similar structured products. The CUSIP number is listed as 61781DDQ8, and the ISIN is US61781DDQ88, providing unique identifiers for trading and settlement purposes. The filing notes that the securities will not be listed on any exchange, meaning they will trade only in the over-the-counter secondary market, if at all, with potentially limited liquidity depending on market conditions and investor demand.

Underwriting and Distribution Arrangements

Morgan Stanley & Co. LLC serves as the agent for the offering and is an affiliate of Morgan Stanley Finance LLC and a wholly owned subsidiary of Morgan Stanley. The preliminary pricing supplement references supplemental information regarding the plan of distribution and conflicts of interest, noting that MS & Co., as an affiliate of the issuer, may engage third-party dealers to distribute the securities. This affiliate relationship is disclosed to alert investors to potential conflicts of interest in the distribution process, as the agent and issuer are controlled by the same parent company.

The filing discloses that selected dealers and their financial advisors will collectively receive from the agent a fixed sales commission for each security sold, though the specific amount was blank in the preliminary supplement. Additionally, MS & Co. may pay a third-party data analytics provider a fee of $0.50 for each security sold in the offering, with such payment made at the request of a third-party dealer who is also designated as a permitted user of the relevant analytics. Morgan Stanley makes clear that it makes no representations or warranties regarding the use or fitness of the analytics and specifically disclaims liability relating to the analytics.