Morgan Stanley Finance Issues $4.5 Million Jump Securities With Auto-Callable Feature Linked to Three Major Stock Indices

Structure and Maturity Framework of the Offered Securities

Morgan Stanley Finance LLC has structured these securities to provide investors with multiple potential outcomes depending on the performance of three underlying equity indices tracked throughout the investment term. The securities carry an issue price of $1,000 per security, with an aggregate principal amount of $4.522 million offered in this transaction. The original issue date was July 24, 2026, following a pricing date of July 21, 2026, with the strike date also set at July 21, 2026. The securities have a five-year maturity period, concluding on July 24, 2031, at which point investors will receive their final payment based on the closing levels of all three underlying indices on the final determination date of July 21, 2031.

The securities feature an automatic early redemption provision that could trigger before maturity if specific performance thresholds are met. If, on the first determination date of July 28, 2027, the closing level of each of the three underlying indices is greater than or equal to its call threshold level, the securities will be automatically redeemed on August 2, 2027, for an early redemption payment of $1,170 per security. This structure allows investors to potentially receive a return on their investment in approximately one year if market conditions favor all three indices simultaneously, though the disclosure indicates that no further payments would be made on the securities once automatic redemption occurs.

Multiple Index Linkage and Initial Performance Thresholds

The securities are linked to three major U.S. equity market indices: the Dow Jones Industrial Average, the Nasdaq-100 Index, and the Russell 2000 Index. The initial levels for each index, established on the strike date of July 21, 2026, were 52,224.64 for the Dow Jones Industrial Average, 29,155.18 for the Nasdaq-100 Index, and 2,987.395 for the Russell 2000 Index. These initial levels serve as the baseline against which final performance will be measured at maturity. The call threshold levels for automatic early redemption are set at 100 percent of each index's initial level, meaning all three indices must reach or exceed their July 21, 2026, closing levels by the first determination date for early redemption to occur.

The structure links investor returns to the worst-performing of the three indices rather than providing diversification benefits. The filing explicitly states that the fact that the securities are linked to more than one underlier does not provide asset diversification benefits and instead means that a decline in any single underlier beyond its downside threshold level will adversely affect returns on the securities, even if other underliers have appreciated or declined less substantially. This worst-performer methodology means that investors assume downside risk from whichever index experiences the weakest performance over the five-year term, creating asymmetric risk exposure compared to a simple index investment.

Upside Participation and Early Redemption Incentives

The securities offer a 200 percent participation rate in the upside performance of the worst-performing index if all three indices finish above their initial levels at maturity. Under this scenario, investors would receive the stated principal amount of $1,000 plus an upside payment calculated as the stated principal amount multiplied by the 200 percent participation rate and the worst-performing underlier's percent change. For example, if the worst-performing index appreciates 10 percent by maturity, investors would receive $1,000 plus $200 (representing 200 percent of the 10 percent gain), totaling $1,200 per security. The early redemption feature provides an alternative path to returns, offering $1,170 per security if all indices meet their thresholds by July 28, 2027, which represents a 17 percent return in approximately one year.

The participation rate of 200 percent is designed to compensate investors for the principal-at-risk nature of the securities and the concentration of returns on the worst-performing index. The disclosure indicates that the estimated value of the securities on the pricing date was $952.50 per security, suggesting that the structured terms were priced to reflect market conditions and volatility assumptions as of July 21, 2026. This valuation discount from the $1,000 issue price reflects the embedded risk features and the cost of the embedded options within the security.

Downside Risk and Principal Loss Scenarios

Investors in these securities face substantial downside risk if any of the three underlying indices declines significantly during the investment term. The downside threshold level is set at 70 percent of each index's initial level, established as 36,557.248 for the Dow Jones Industrial Average, 20,408.626 for the Nasdaq-100 Index, and 2,091.177 for the Russell 2000 Index. If the final level of any underlier is less than its downside threshold level at maturity, investors will lose 1 percent for every 1 percent decline in the level of the worst-performing underlier, with the payment at maturity calculated as the stated principal amount multiplied by the performance factor of the worst-performing underlier.

Under this loss scenario, the payment at maturity could be significantly less than the stated principal amount of $1,000 and could theoretically reach zero if an index declines 100 percent from its initial level. The filing emphasizes that if the final level of any underlier is equal to or less than its initial level but the final level of each underlier is greater than or equal to its downside threshold level, investors will receive only the stated principal amount at maturity without any upside participation. This creates a scenario where investors forgo current income over five years and recover only their principal if indices decline modestly but not catastrophically. The disclosure warns that the securities are for investors willing to risk their principal and forgo current income, and that investors in the securities must accept the risk of losing their entire initial investment based on the performance of any underlier.

Guarantor Credit Risk and Unsecured Nature of Obligations

Although Morgan Stanley Finance LLC is the issuer, the securities are fully and unconditionally guaranteed by Morgan Stanley, the parent company. This guarantee structure provides some credit protection, as it extends the obligation to Morgan Stanley if the finance subsidiary cannot meet its payment obligations. However, all payments are subject to Morgan Stanley's credit risk, and if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. The securities are unsecured obligations and do not provide investors with any security interest in or access to any underlying reference asset.

The filing emphasizes 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 distinction is important for investors accustomed to bank product protections. The unsecured nature of the securities means that in a bankruptcy or financial distress scenario involving Morgan Stanley or Morgan Stanley Finance LLC, investors would be treated as general unsecured creditors, potentially recovering only a portion of their investment depending on the resolution process and asset recovery priorities.

Distribution and Commission Structure

Morgan Stanley & Co. LLC, an affiliate of Morgan Stanley Finance LLC and a wholly-owned subsidiary of Morgan Stanley, serves as the agent for this offering. The price to public is $1,000 per security for a total of $4.522 million. The agent's commissions and fees total $36.25 per security, or $163,922.50 in aggregate. The proceeds to Morgan Stanley Finance LLC after commissions are $963.75 per security, or $4,358,077.50 in aggregate. Selected dealers and their financial advisors will collectively receive a fixed sales commission of $36.25 for each security they sell, compensating them for distribution efforts in placing the securities with investors.

The filing discloses an additional data analytics fee arrangement, whereby Morgan Stanley & Co. may pay a third-party data analytics provider a fee of $0.50 for each security sold in this offering. This fee is being obtained at the request of a third-party dealer involved with the offering, who is also designated as a permitted user of the relevant analytics. Morgan Stanley and Morgan Stanley & Co. make no representations or warranties regarding the use or fitness of the analytics and specifically disclaim liability relating to the analytics. This arrangement represents an ancillary cost component within the broader distribution and marketing infrastructure supporting the offering.

Regulatory Status and Securities Classification

The securities are notes issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, with registration statement numbers 333-293641 and 333-293641-01. The pricing supplement was filed pursuant to Securities and Exchange Commission Rule 424(b)(2) on July 23, 2026, following the pricing date of July 21, 2026. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, nor have they determined whether the pricing supplement or accompanying product supplement, index supplement, tax supplement, and prospectus are truthful or complete. The securities have not been listed on any securities exchange, meaning they will trade in over-the-counter markets rather than on a primary national exchange.

The securities carry a CUSIP number of 61781HMR7 and an ISIN of US61781HMR74, allowing investors and market participants to identify and track these specific securities in trading systems and databases. As principal-at-risk structured investments, these securities fall within the broader category of equity-linked notes and require investors to carefully review all accompanying documentation to understand the complex risk-return characteristics and performance mechanics. The disclosure notes that the Securities and Exchange Commission warning that any representation that such regulators have approved or disapproved the securities constitutes a criminal offense, underscoring the importance of accurate disclosure in this context.

Risk Factors Specific to Worst-Performing Index Methodology

The securities' linkage to the worst-performing of three indices creates concentration risk that differs fundamentally from investing in a diversified portfolio or in a single index. If one index significantly underperforms the other two, that worst-performing index will determine the final payment to investors, regardless of how well the other two indices perform. During the five-year term, investors are exposed to the combined downside risk of three separate equity market segments: large-cap stocks represented by the Dow Jones Industrial Average, technology-heavy mid-cap stocks represented by the Nasdaq-100 Index, and small-cap stocks represented by the Russell 2000 Index. A sharp decline in any single segment would trigger investor losses, even if the other two segments experienced positive returns.

The 70 percent downside threshold provides some protection against moderate declines, allowing investors to recover their full principal if the worst-performing index closes between 70 percent and 100 percent of its initial level. However, this protection disappears entirely once an index falls below the 70 percent threshold, creating a cliff-like loss scenario where losses accelerate rapidly for every additional percent decline beyond that point. The filing emphasizes that the securities are designed for investors willing to risk their principal and forgo current income in exchange for potential upside participation through the auto-callable feature or the 200 percent participation rate. This positioning indicates that these securities are intended for sophisticated investors with specific risk tolerance and return expectations rather than conservative investors seeking capital preservation.

Tax Treatment and Supplemental Documentation

The securities are structured as principal-at-risk notes with complex tax characteristics that may differ from the tax treatment of ordinary debt securities or equity investments. Morgan Stanley Finance LLC has provided a tax supplement dated April 8, 2026, as part of the offering documentation to address the tax implications of these securities for various categories of investors. The tax treatment of structured investments can be complex and may depend on individual investor circumstances, including whether gains are treated as ordinary income or capital gains, the treatment of any forgone interest, and various other factors.

The accompanying product supplement dated April 8, 2026, and index supplement dated April 8, 2026, provide detailed information about the mechanics, pricing methodologies, and specific terms governing the securities. These documents, together with the prospectus dated April 8, 2026, constitute the full offering documentation that investors should review before making an investment decision. The pricing supplement itself explicitly states that investors should read the pricing supplement together with these related documents, as they collectively describe all material terms and conditions of the investment.

Performance Monitoring and Determination Mechanics

The securities employ specific determination dates to assess whether performance thresholds have been met, with calculations subject to postponement for non-trading days and certain market disruption events. The first determination date of July 28, 2027, is when Morgan Stanley Finance LLC will assess whether all three underlying indices have closed at or above their call threshold levels of 100 percent of their initial levels. If this condition is met, automatic early redemption will be triggered, with the early redemption payment of $1,170 per security payable on August 2, 2027. If this condition is not met, the securities will continue to be held through maturity, with the final determination date set for July 21, 2031, subject to the same postponement provisions.

On the final determination date of July 21, 2031, Morgan Stanley Finance LLC will determine the closing levels of each of the three underlying indices to calculate the final level for each and determine which is the worst-performing underlier based on percentage return from initial level to final level. This calculation will trigger one of three payment scenarios: the stated principal amount plus upside payment if all indices finished above their initial levels, the stated principal amount alone if any index finished at or below its initial level but all remained above their 70 percent downside thresholds, or the stated principal amount multiplied by the performance factor of the worst-performing underlier if any index fell below its downside threshold. The maturity date of July 24, 2031, will be the date on which Morgan Stanley Finance LLC delivers the final payment to investors, concluding the five-year investment term.