Morgan Stanley Finance Issues Auto-Callable Securities Linked to Uranium ETF With 16.25% Contingent Coupon

Structure and Principal Features of the Structured Securities

Morgan Stanley Finance LLC, through this update dated July 16, 2026, has priced and issued Contingent Income Auto-Callable Securities structured around the Global X Uranium ETF as the underlying reference asset. The securities were issued on July 21, 2026, with a stated principal amount of $1,000 per security and an aggregate principal amount of $581,000. These notes are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program and represent unsecured obligations that are fully and unconditionally guaranteed by Morgan Stanley, the parent company.

The term structure extends approximately two years, maturing on June 22, 2028, with the final observation date scheduled for June 16, 2028. The strike date and pricing date both fell on July 16, 2026, establishing the initial level of the underlying uranium ETF at $39.11 as the reference point for all subsequent performance measurements and payment calculations. This pricing approach ties all returns and loss scenarios directly to the movement of uranium exposure within the Global X ETF structure.

Contingent Coupon Mechanism and Payment Conditions

The securities feature a contingent coupon structure offering investors a 16.25% annual interest rate, representing an above-market yield profile designed to compensate for the embedded risks within the structure. However, this coupon is not guaranteed; investors will receive no interest payment for any interest period if the underlying uranium ETF closes below the coupon barrier level of $23.466 (60% of the initial level) on the related observation date. The coupon payment dates align with specific observation dates throughout the security's two-year term, and any coupon payment due on a non-business day will be made on the next succeeding business day without adjustment.

The contingent nature of this coupon creates meaningful risk for income-focused investors. Over the entire two-year holding period, if the uranium ETF declines below the coupon barrier on each observation date, investors could receive no coupon payments whatsoever while still remaining exposed to principal loss at maturity. The filing discloses that observation dates occur on specific predetermined dates, with coupon payments contingent on the underlier's performance relative to the 60% threshold throughout the investment period.

Automatic Early Redemption Provisions and Call Threshold Mechanics

The securities incorporate an automatic early redemption feature that activates if the underlying uranium ETF's closing level reaches or exceeds the call threshold level of $39.11 (100% of the initial level) on any redemption determination date. The first redemption determination date is January 19, 2027, with subsequent determination dates scheduled for April 16, 2027, July 16, 2027, October 18, 2027, January 18, 2028, and April 17, 2028. Should the call threshold be met on any of these dates, the securities will be automatically redeemed on the corresponding early redemption date for payment of the stated principal amount plus any applicable contingent coupon.

Under the early redemption framework, if the uranium ETF simply returns to its strike price or higher on the first determination date in January 2027, the entire position would be called away and investors would receive their principal plus accrued coupon. The filing emphasizes that under no circumstances will the securities be redeemed prior to the first redemption determination date, meaning investors are locked into this position through January 2027 regardless of uranium ETF performance. Once automatically redeemed, no further payments will be made on the securities.

Downside Protection Threshold and Principal-at-Risk Framework

The downside threshold level of $23.466 (60% of the initial level) establishes the critical performance boundary for maturity payments. If the uranium ETF closes at or above this level on the final observation date, investors receive the full stated principal amount of $1,000 per security at maturity (in addition to any contingent coupon earned on the final observation date if payable). However, if the final level falls below the downside threshold of 60%, the principal payment declines proportionally with each percentage-point decline in the underlying ETF.

The filing explicitly discloses that if the final level falls below the downside threshold, investors will lose 1% of principal for every 1% decline in the uranium ETF over the two-year term. This mechanism creates a scenario where a 40% decline in the uranium ETF from the strike price would result in complete loss of principal (zero payment at maturity). The disclosure emphasizes that under these circumstances "the payment at maturity will be significantly less than the stated principal amount and could be zero," making this a genuine principal-at-risk security rather than a conventional debt instrument.

Pricing Economics and Distribution Arrangement

The securities were priced at $1,000 per security (par value), with the aggregate offering size of $581,000 reflecting 581 units at the stated amount. The distribution involved Morgan Stanley & Co. LLC, an affiliate of the issuer, acting as agent, with selected dealers receiving commissions of $18.75 per security sold. The filing discloses that Morgan Stanley & Co. may pay a third-party data analytics provider $0.50 per security sold at the request of dealers, with both the issuer and agent disclaiming representations regarding use, fitness, and liability related to these analytics.

The net proceeds to Morgan Stanley Finance LLC totaled $570,106.25 after deducting agent commissions and fees of $10,893.75. The estimated value on the pricing date was $967.40 per security, reflecting a discount to par that accounts for the optionality embedded within the structure. This pricing differential highlights the embedded cost of the automatic early redemption feature and contingent coupon mechanics, which benefit the issuer through potential upside capture in a rising uranium ETF environment.

Credit Risk and Guarantee Framework

All payments on the securities are subject to Morgan Stanley's credit risk. The update discloses that if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. The securities are unsecured obligations with no security interest in or access to any underlying reference asset, distinguishing them from secured debt instruments. While the guarantee from Morgan Stanley provides credit backing equivalent to the parent company's credit rating, the guarantee does not mitigate the market risk of principal loss if the uranium ETF declines below the downside threshold.

The filing emphasizes that these securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Investors bear both counterparty risk (Morgan Stanley credit risk) and market risk (uranium ETF performance risk) simultaneously. The non-secured nature of the obligations means investors have no recourse to specific assets if the issuer encounters financial stress.

Uranium Sector Exposure Through Global X ETF Structure

The securities provide investors with exposure to uranium equities through the Global X Uranium ETF, an exchange-traded fund focused on companies engaged in uranium mining, processing, and related activities. The uranium sector has attracted renewed investor interest driven by nuclear energy demand growth, grid decarbonization trends, and geopolitical supply considerations. By linking these securities to uranium ETF performance rather than individual company equities, the structure provides diversified sector exposure with reduced single-company idiosyncratic risk.

The initial level of $39.11 on July 16, 2026, establishes the baseline for measuring whether investors will receive coupons (requiring the ETF to remain above 60% of this level) or face principal loss at maturity (if it falls below 60%). The uranium sector's volatility characteristics mean that achieving the call threshold of $39.11 or maintaining the coupon barrier of $23.466 depends substantially on broader nuclear energy trends, uranium commodity pricing, geopolitical developments, and energy policy shifts during the 2026-2028 period.

Risk Factors and Investment Suitability Considerations

The disclosure clearly states that these securities are designed for investors seeking above-market interest rates while being willing to accept the risk of losing a significant portion or potentially all of their principal. The filing emphasizes that investors "must be willing to accept the risk of losing their entire initial investment," underscoring the principal-at-risk nature of the structure. The securities do not guarantee repayment of principal and do not provide regular interest payments; instead, coupons are contingent on underlying ETF performance.

Additionally, investors will not participate in any appreciation of the underlier beyond the automatic early redemption feature. If the uranium ETF appreciates significantly above the call threshold, investors' upside is capped at the early redemption payment (principal plus one coupon), meaning they forgo further gains while remaining exposed to downside losses should the ETF reverse course before early redemption is triggered. This asymmetric payoff structure favors the issuer in strongly rising uranium markets while concentrating losses on investors in declining uranium environments.

Observation and Redemption Timeline Through Maturity

The securities feature seven total observation dates for coupon determinations and six redemption determination dates for potential early calls. The coupon payment dates follow the observation dates throughout the term, creating quarterly or semi-annual coupon assessment periods depending on the specific schedule disclosed. The final observation date on June 16, 2028, determines both the contingent coupon payment (if any) due on the maturity date and the final level for principal repayment calculations.

The filing states that observation dates and redemption determination dates are subject to postponement for non-trading days and certain market disruption events, providing the issuer with flexibility to adjust timings while maintaining the security's structural integrity. This postponement language protects against situations where market closures or exceptional volatility might otherwise leave the securities without updated performance information at critical juncture dates. Investors should monitor these predetermined dates closely to track whether early redemption conditions have been met or coupon payments will be made.