Morgan Stanley Finance Issues Three-Year Callable Contingent Income Securities With Principal-at-Risk Structure

Contingent Coupon Structure and Payment Mechanics

The securities pay a contingent coupon at an annual rate of 12.40%, but only under specific conditions tied to the underlying assets' performance. The disclosure states that investors will receive the contingent coupon payment only if the closing level of each underlier is greater than or equal to its coupon barrier level on the related observation date. This means that all three underlying assets—the S&P 500 Index, the Regional Banking ETF, and the Technology Select Sector SPDR ETF—must meet their respective coupon barrier thresholds for interest payments to be made.

If the closing level of any single underlier falls below its coupon barrier level on any observation date, the company will pay no interest with respect to the related interest period. This all-or-nothing mechanism means investors face binary coupon outcomes: they either receive the full 12.40% annual rate or nothing at all for that period. The contingent nature of the coupon reflects the structured product's design philosophy, where above-market interest rates are offset by heightened performance requirements on the underlying assets.

Principal Protection Mechanics and Downside Exposure

At maturity, if the securities have not been redeemed prior to that date and the final level of each underlier is greater than or equal to its downside threshold level, investors will receive the stated principal amount plus any contingent coupon otherwise due on the final observation date. The stated principal amount is $1,000 per security. However, the disclosure emphasizes that this favorable outcome depends on all three underlying assets meeting their downside thresholds simultaneously.

The downside scenario presents material risk to investors. If the final level of any underlier falls below its downside threshold level, investors will lose 1% for every 1% decline in the level of the worst-performing underlier over the term of the securities. This structure means that the payment at maturity could be significantly less than the stated principal amount and could be zero. The disclosure explicitly warns that investors in these securities must be willing to accept the risk of losing their entire initial investment based on the performance of any single underlier. The worst-performing asset mechanism ensures that strong performance from two of three underlying assets provides no protection if the third asset declines substantially.

Multi-Asset Linkage and Diversification Limitations

The securities are linked to three distinct underlying assets: the S&P 500 Index, the State Street SPDR S&P Regional Banking ETF, and the State Street Technology Select Sector SPDR ETF. The document notes that the S&P 500 Index is referred to as an underlying index, while the two ETFs are referred to as underlying funds. This multi-asset structure creates a specific risk profile that differs fundamentally from conventional diversified investments.

The disclosure explicitly states that the fact that the securities are linked to more than one underlier does not provide any asset diversification benefits. Instead, the worst-performing underlier mechanism means that a decline in the level of any underlier beyond its coupon barrier level or downside threshold level will adversely affect return on the securities, even if the other underliers have appreciated or have not declined as much. This structure creates a scenario where the strongest performer and the weakest performer are treated asymmetrically, with the weakest determining all outcomes. Investors will not participate in any appreciation of any underlier, meaning upside gains on the underlying assets provide no direct benefit.

Early Redemption Rights and Call Feature Mechanics

Morgan Stanley has embedded a call feature in these securities that grants the company the right to redeem the investment early under specified conditions. The securities are not subject to early redemption until the first redemption date of February 3, 2027. Beginning on that date, the company may redeem the securities on any of 11 scheduled redemption dates: February 3, 2027; May 5, 2027; August 4, 2027; November 3, 2027; February 3, 2028; May 3, 2028; August 3, 2028; November 2, 2028; February 2, 2029; and May 3, 2029.

An early redemption will occur only if the output of a risk-neutral valuation model indicates that redeeming is economically rational for Morgan Stanley as compared to not redeeming. The valuation model operates on a business day selected by the calculation agent, no earlier than three business days before the observation date preceding a redemption date and no later than such observation date. The model takes as input prevailing reference market levels, volatilities, correlations as of the determination date, and Morgan Stanley's credit spreads as of the pricing date. This structure means redemption decisions reflect Morgan Stanley's assessment of future value and the cost of maintaining the obligation. If the securities are called, the company will provide notice no later than the observation date preceding the redemption date, and redemption payment equals the stated principal amount plus any contingent coupon otherwise due with respect to the relevant interest period.

Issuance Terms, Pricing, and Timeline

Morgan Stanley Finance LLC is the issuer of the securities, with the parent company Morgan Stanley serving as guarantor. The stated principal amount is $1,000 per security, issued at $1,000 per security. The aggregate principal amount of the offering was not disclosed in the filing. The strike date and pricing date are both July 30, 2026, with the original issue date set for August 4, 2026, and the maturity date August 2, 2029, representing a three-year term.

The filing indicates that the estimated value on the pricing date is approximately $951.90 per security, or within $45.00 of that estimate. This estimate suggests a discount to par value at issuance, with the gap between issue price and estimated value reflecting the cost of the embedded optionality and the contingent coupon structure. Specific commission rates for selected dealers and agent fees were not fully disclosed in the available filing sections, although the document notes that MS & Co., an affiliate of the issuer, may pay a third-party data analytics provider a fee of $0.50 for each security sold.

Credit Risk and Unsecured Obligation Status

The securities are unsecured obligations of Morgan Stanley Finance LLC and rely entirely on the full and unconditional guarantee of the parent company, Morgan Stanley. The disclosure emphasizes that all payments are subject to Morgan Stanley's credit risk. If the company defaults on its obligations, investors could lose some or all of their investment. The securities are not secured obligations, meaning investors will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.

This credit structure creates a double layer of risk beyond the performance of the underlying assets. Not only are investors exposed to the worst-performing asset mechanism, but they are also exposed to the credit quality of Morgan Stanley. Unlike securities backed by collateral or specific asset pools, these notes are backed only by the general credit of the issuer and guarantor. The filing does not disclose any special provisions for events of default, creditor remedies, or additional protections beyond the Morgan Stanley guarantee.

Product Classification and Regulatory Status

The securities are classified as principal-at-risk securities and are issued as part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program. The disclosure explicitly states that the securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. This classification distinguishes these instruments from traditional debt securities and positions them as structured products with embedded derivatives and contingent payment features.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined whether the pricing supplement, product supplement, index supplement, tax supplement, and prospectus are truthful or complete. The disclosure 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. They are not obligations of, or guaranteed by, a bank, despite being issued by a Morgan Stanley subsidiary.

Investor Risk Profile and Intended Audience

The disclosure identifies a specific investor profile for which these securities are intended. The securities are designed for investors who seek an opportunity to earn interest at a potentially above-market rate—in this case 12.40% annually—in exchange for accepting the risk of losing a significant portion or all of their principal. The offering is structured for investors willing to accept the risk of receiving no coupons over the entire term of the securities and the risk of early redemption based on the output of a risk-neutral valuation model.

The document warns prospective investors that they will not participate in any appreciation of any underlier, meaning the upside potential is strictly limited to the contingent coupon payments, while downside exposure is substantial. This asymmetric payoff structure—limited upside, substantial downside—represents a fundamental departure from traditional equity investments. The securities are particularly unsuitable for investors seeking principal preservation, steady income that is not contingent on asset performance, or exposure to potential appreciation of the underlying assets.

Amendment Circumstances and Documentation Framework

The pricing supplement was initially dated July 17, 2026, and Amendment No. 1 was filed July 20, 2026. The specific changes made in the amendment were not detailed in the available portions of the filing. The securities are governed by an accompanying product supplement, index supplement, tax supplement, and prospectus, all dated April 8, 2026, except the prospectus which shows an April 8, 2026 date in the filing excerpt. These documents are incorporated by reference into the pricing supplement and form the complete disclosure package for the offering.

The filing was submitted pursuant to Securities Act Rule 424(b)(2), which governs the filing of pricing-related prospectus supplements for registered securities offerings. Registration Statement Numbers 333-293641 and 333-293641-01 are cited as the underlying registration statements. Morgan Stanley & Co. LLC, an affiliate of the issuer and a wholly-owned subsidiary of Morgan Stanley, serves as the agent for the offering and handles the distribution arrangement.