Morgan Stanley Finance LLC has issued $6.5 million in Contingent Income Auto-Callable Securities due July 26, 2029, according to a pricing supplement filed with the Securities and Exchange Commission on July 27, 2026. The structured investments are fully guaranteed by Morgan Stanley and track the performance of two exchange-traded funds: the iShares Russell 2000 ETF and the State Street Technology Select Sector SPDR ETF. The securities offer a contingent coupon at an annual rate of 12.50% but expose investors to significant downside risk, including the potential loss of their entire principal investment.

Key Points

  • NYSE: MS-PQ
  • Morgan Stanley Finance LLC issued $6.5 million in auto-callable structured notes with contingent coupon payments and principal-at-risk features
  • Pricing date was July 23, 2026, with an original issue date of July 28, 2026, and maturity date of July 26, 2029
  • The securities offer a 12.50% annual contingent coupon if both underlying ETF values remain at or above their respective coupon barrier levels; investors face total loss of principal if either ETF declines significantly

Security Structure and Underlying Assets

Morgan Stanley Finance LLC has structured these auto-callable securities to track the performance of two widely held exchange-traded funds. The iShares Russell 2000 ETF, also known as the IWM Fund, and the State Street Technology Select Sector SPDR ETF, known as the XLK Fund, serve as the underlying reference assets. The securities are issued at $1,000 per unit, with an aggregate principal amount of $6.5 million. Each security represents a $1,000 investment, meaning the offering includes 6,500 individual securities.

The filing indicates that the securities are principal-at-risk instruments, meaning investors do not have a guaranteed return of their initial investment. According to the terms, the value of the securities depends on the worst-performing of the two underlying ETFs. This structure means that even if one ETF appreciates significantly, investors will not benefit from that gain if the other ETF performs poorly. The worst-performer methodology introduces a significant asymmetry in risk and potential return.

Contingent Coupon Payment Mechanism

The securities feature a contingent coupon structure that ties interest payments directly to the performance of both underlying ETFs. The annual coupon rate is set at 12.50%, but payments are contingent on specific performance conditions being met on observation dates. The filing states that coupon payments will only be made if the closing level of each underlying ETF is greater than or equal to its designated coupon barrier level on the related observation date.

The coupon barrier levels are set at 70% of the initial levels of each ETF. For the IWM Fund, the coupon barrier level is $205.653, while for the XLK Fund, the coupon barrier level is $126.189. If either ETF falls below its coupon barrier level on any observation date, no coupon will be paid with respect to that interest period. This feature means investors could receive zero interest payments over extended periods if market conditions move unfavorably, even while holding the securities to maturity.

Automatic Early Redemption Features

The securities include an automatic early redemption feature that activates if both underlying ETFs appreciate sufficiently. The call threshold levels are set at 100% of the initial levels for each ETF: $293.79 for the IWM Fund and $180.27 for the XLK Fund. If the closing level of each ETF reaches or exceeds its call threshold level on any redemption determination date, the securities will be automatically redeemed.

According to the filing, the first redemption determination date is January 22, 2027. Subsequent redemption determination dates occur quarterly through April 23, 2029. Should automatic redemption occur, investors will receive the stated principal amount plus any contingent coupon owed for the related interest period. However, the filing notes that no further payments will be made once securities are automatically redeemed, effectively capping investor returns at the stated principal plus accrued coupons.

Principal-at-Risk Payment at Maturity

If the securities are not automatically redeemed prior to maturity on July 26, 2029, the final payment depends on the performance of the worst-performing underlying ETF. The filing discloses that investors face a downside threshold level set at 60% of the initial level for each ETF. For the IWM Fund, this threshold is approximately $176.274, and for the XLK Fund, it is approximately $108.162.

The filing states that if the final level of each ETF is greater than or equal to its downside threshold level, investors will receive the stated principal amount plus any contingent coupon owed. However, if the final level of either ETF falls below its downside threshold level, investors will lose 1% for every 1% decline in the worst-performing ETF over the term of the securities. Under adverse market conditions, this structure could result in investors recovering significantly less than their initial investment, and in severe scenarios, could result in zero return of principal.

Pricing, Commissions, and Distribution

The securities were priced at $1,000 per unit on July 23, 2026, and the filing indicates an estimated value on the pricing date of $973.50 per security. This $26.50 per-unit discount reflects the value of the embedded options and the contingent nature of the coupon payments. The aggregate principal amount issued totals $6.5 million, representing 6,500 individual securities.

Morgan Stanley & Co. LLC, an affiliate of the issuer and a wholly-owned subsidiary of Morgan Stanley, acts as the agent. The filing discloses that the agent receives commissions and fees of $20 per security sold, totaling $130,000 on the offering. This means the issuer receives $980 per security, or $6.37 million in aggregate proceeds. Selected dealers and their financial advisors receive a portion of the agent's fixed sales commission based on their distribution efforts.

Guarantor Credit Risk and Unsecured Status

Although the securities are fully and unconditionally guaranteed by Morgan Stanley, the filing emphasizes that they remain unsecured obligations. Investors have no security interest in any underlying reference assets and no specific access to collateral in the event of issuer default. The guarantee is only as strong as Morgan Stanley's creditworthiness, and the filing explicitly warns that if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment.

The filing 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. This clarification underscores that investors bear full credit risk with respect to both the issuer and guarantor. The structured nature of these instruments means that traditional deposit protections do not apply.

Timeline and Key Dates

The securities follow a specific timeline established in the filing. The strike date was July 22, 2026, which serves as the reference date for establishing initial levels of the underlying ETFs. The pricing date occurred on July 23, 2026, and the original issue date is July 28, 2026. The final observation date for determining the final payment is scheduled for July 23, 2029, subject to postponement for non-trading days and certain market disruption events.

Maturity occurs on July 26, 2029, approximately three years from the issue date. Coupon payment dates correspond to observation dates and early redemption dates as specified in the filing. The first redemption determination date is January 22, 2027, with subsequent dates occurring at regular intervals thereafter. These dates are subject to postponement if they fall on non-trading days or if market disruption events occur.

Risk Profile and Investor Suitability

The filing characterizes these securities as appropriate for investors seeking above-market interest rates in exchange for accepting significant principal risk. The disclosure states that the securities are intended for investors willing to accept the risk of losing their entire initial investment based on the performance of either underlying ETF. The worst-performer structure means that a decline in either ETF beyond its coupon barrier level will adversely affect returns, even if the other ETF appreciates or declines less substantially.

The filing explicitly notes that investors will not participate in any appreciation of either underlying ETF. This means the upside is capped at the automatic early redemption level, while the downside extends to zero in severe market scenarios. For investors requiring principal protection or growth exposure to small-cap and technology stocks, these securities present a fundamentally different risk-return profile than direct ETF ownership or traditional debt securities.

Registration and Regulatory Compliance

The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relates to Registration Statement Nos. 333-293641 and 333-293641-01. The filing is dated July 23, 2026, and was filed on July 27, 2026. The securities are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, a framework that allows the issuer to offer various structured investment products.

The filing references accompanying product supplement, index supplement, tax supplement, and prospectus documents dated April 8, 2026, which provide additional terms and conditions. The SEC and state securities regulators have not approved or disapproved these securities, nor determined the truthfulness or completeness of the offering documentation. The filing includes standard disclaimers that any representation to the contrary would constitute a criminal offense.