Morgan Stanley Finance LLC Issues $1.6 Million Dual Directional Trigger PLUS Structured Notes With Principal at Risk

Structure and Payment Terms of the Dual Directional Trigger PLUS Securities

The Dual Directional Trigger PLUS securities issued by Morgan Stanley Finance LLC are unsecured obligations of MSFL, fully and unconditionally guaranteed by Morgan Stanley. The securities pay no interest and do not guarantee any return of principal at maturity. Instead, payment at maturity is contingent upon the performance of the worst-performing underlier among the Dow Jones Industrial Average and the S&P 500 Index. The initial levels used to measure performance were 51,711.65 for the Dow Jones Industrial Average and 7,408.30 for the S&P 500 Index, both established on the strike date of July 23, 2026.

The payment structure incorporates multiple scenarios based on final index levels measured on the observation date of July 23, 2030. If the final level of each underlier exceeds its initial level, investors receive the stated principal amount plus a leveraged upside payment calculated by multiplying the stated principal amount by a 130% leverage factor and the underlier percent change of the worst-performing underlier. This leveraged structure amplifies gains during positive market performance scenarios but simultaneously increases exposure to downside risk.

Downside Protection and Loss Scenarios for Investors

The securities incorporate a downside threshold level designed to provide limited protection against losses before maximum loss exposure applies. For the Dow Jones Industrial Average, the downside threshold level is 36,198.155, representing 70% of the initial level. For the S&P 500 Index, the downside threshold level is 5,185.81, also representing 70% of the initial level. If the final level of either underlier falls below its respective downside threshold but the worst-performing underlier remains above its threshold, investors receive the stated principal amount plus a positive return equal to the absolute value of the percentage decline in the worst-performing underlier multiplied by the 50% absolute return participation rate.

The disclosure explicitly states that under this scenario, the payment at maturity is effectively limited to a positive return of 15%. However, if the final level of either underlier falls below its downside threshold level, investors face significant losses. In this scenario, payment at maturity equals the stated principal amount multiplied by the performance factor of the worst-performing underlier, which represents the ratio of final level to initial level. The filing emphasizes that under these circumstances, the payment could be significantly less than the stated principal amount and could potentially reach zero, representing a total loss of the investor's initial investment.

Pricing and Estimated Value of the Securities

Morgan Stanley Finance LLC priced the Dual Directional Trigger PLUS securities at $1,000 per security, with an aggregate principal amount of $1.597 million, representing 1,597 securities issued. However, the estimated value on the pricing date was $986.00 per security, representing a $14 per security discount to the issue price. The filing discloses that this estimated value reflects costs associated with issuing, selling, structuring, and hedging the securities, which are borne by investors. The difference between the issue price and estimated value demonstrates the embedded costs of the structured product.

Morgan Stanley & Co. LLC served as the agent for the offering and received commissions and fees of $5 per security, totaling $7,985 on the aggregate principal amount. The proceeds to Morgan Stanley Finance LLC were $995 per security, totaling $1,589,015 for the aggregate offering. The filing notes that MS & Co. expected to sell the securities to an unaffiliated dealer at $995 per security for further distribution to fee-based advisory accounts at the public price of $1,000 per security. The securities are exclusively available for sale to investors in fee-based advisory accounts.

Underlier Selection and Worst-Performer Methodology

The securities are structured to track the performance of the worst-performing underlier between the Dow Jones Industrial Average and the S&P 500 Index. The worst-performing underlier is determined as the index with the lowest percentage return from its initial level to its final level on the observation date. This methodology means that even if one index performs strongly, if the other index declines significantly, investors face downside exposure based on the weaker performer's results. The filing emphasizes that the use of two underliers does not provide asset diversification benefits; instead, a decline in either underlier beyond its downside threshold level adversely affects returns on the securities, regardless of performance in the other underlier.

The underlier percent change for each index is calculated as (final level minus initial level) divided by the initial level. If the calculation results in a negative value in the downside protection scenario, the filing specifies that the absolute underlier return equals the absolute value of the underlier percent change, effectively converting negative percentage changes to positive values for purposes of calculating the limited downside protection payment. This technical specification impacts how investor returns are computed during market declines above the 30% threshold.

Credit Risk and Guarantor Obligations

All payments on the securities are subject to the credit risk of Morgan Stanley Finance LLC and Morgan Stanley. The filing explicitly states that if Morgan Stanley or MSFL default on their obligations, investors could lose some or all of their investment. The securities are unsecured obligations of MSFL, meaning investors have no security interest in any underlying reference asset and have no access to any collateral. The guarantee by Morgan Stanley is unconditional but does not eliminate credit risk exposure; it merely ensures that the parent company remains liable for MSFL's obligations.

The filing further clarifies that the securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation, any other governmental agency, or instrumentality. They are not obligations of any bank. Investors' ability to recover their investment in the event of default depends entirely on the creditworthiness and financial position of Morgan Stanley and the assets available to satisfy claims against MSFL in bankruptcy or default proceedings. This credit risk exposure operates independently of the index performance risk embedded in the structured note design.

Intended Investor Profile and Risk Acknowledgment

The filing identifies the target investor profile for the Dual Directional Trigger PLUS securities as those who seek a return based on the performance of the worst-performing underlier and are willing to risk their principal and forgo current income in exchange for upside leverage, absolute return participation in limited downside scenarios, and limited protection against loss of principal. This characterization acknowledges that the securities are speculative instruments designed for investors with specific risk tolerances and investment objectives that align with structured note features rather than traditional debt securities.

The filing emphasizes multiple times that investors must be willing to accept the risk of losing their entire initial investment based on the performance of either underlier. The disclosure notes that the securities involve risks not associated with investments in ordinary debt securities. Potential investors are directed to review the Risk Factors section beginning on page 6 of the pricing supplement. The repeated emphasis on principal-at-risk messaging and worst-performer methodology underscores the speculative nature of the investment relative to conventional fixed-income securities.

Registration and Distribution Information

The securities are issued under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program and are registered under SEC Registration Statement Nos. 333-293641 and 333-293641-01. The pricing supplement was filed pursuant to Rule 424(b)(2) on July 27, 2026, with a dated July 23, 2026. The securities are identified by CUSIP 61781G2L4 and ISIN US61781G2L44. The filing discloses that the securities will not be listed on any securities exchange, limiting secondary market liquidity and trading opportunities for investors seeking to exit positions prior to maturity.

Morgan Stanley & Co. LLC, a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL, served as the agent for the offering. The filing addresses conflicts of interest arising from MS & Co.'s dual role as both issuer affiliate and distribution agent, cross-referencing detailed conflict disclosures in the accompanying product supplement. The distribution was limited to fee-based advisory accounts, restricting access to a specific investor category. The aggregate principal amount of $1.597 million and 1,597 securities issued represent the initial placement size for this particular structured note issuance.

Valuation Methodology and Pricing Inputs

The estimated value of $986.00 per security on the pricing date was determined using Morgan Stanley's own pricing and valuation models, market inputs, and assumptions relating to the underliers and instruments based on the underliers. The valuation incorporates estimates of volatility and other factors, including current and expected interest rates, as well as an interest rate related to Morgan Stanley's secondary market credit spread. The filing acknowledges that the valuation reflects the dual-component nature of the securities comprising both a debt component and a performance-based component linked to the underliers.

The difference between the $1,000 issue price and the $986.00 estimated value represents the embedded costs of structuring, hedging, and distributing the securities. The filing does not disclose the specific volatility assumptions, interest rate inputs, or credit spread used in the valuation model. Investors should understand that the estimated value reflects Morgan Stanley's internal assumptions and valuation methodologies, which may differ from valuations conducted by independent third parties or the prices at which these securities could be sold in secondary market transactions.

Original Issue Date and Term to Maturity

The original issue date for the Dual Directional Trigger PLUS securities was July 28, 2026, five business days after the pricing date of July 23, 2026. The securities have a maturity date of July 26, 2030, representing approximately four-year term to maturity. The observation date on which final index levels are measured is July 23, 2030, subject to postponement for non-trading days and certain market disruption events. This structure means that investor returns depend on index performance over a four-year measurement period, with final values determined near maturity and subject to potential adjustment for market disruption or trading halts.

The four-year term exposes investors to market volatility and index performance over a medium-term horizon. The potential for postponement of the observation date for market disruption events introduces uncertainty regarding the exact final measurement dates and creates potential for extension beyond the stated maturity date. During the holding period, investors receive no periodic interest payments and have no ability to adjust their exposure if market conditions or personal circumstances change, absent secondary market transactions at whatever prices prevail in the limited market for structured notes.