Morgan Stanley Finance LLC Issues $5.4 Million Auto-Callable Securities Linked to Cadence Design Systems Stock

Morgan Stanley Finance LLC Issues Principal-at-Risk Structured Securities

Morgan Stanley Finance LLC, a subsidiary of Morgan Stanley and fully guaranteed by the parent company, has issued Contingent Income Auto-Callable Securities tied to the common stock of Cadence Design Systems, Inc. The aggregate principal amount of the offering totals $5,419,000, with each security carrying a stated principal amount of $1,000. The securities were priced on July 23, 2026, with an original issue date of July 28, 2026, and a maturity date of August 26, 2027. The disclosure indicates that Morgan Stanley & Co. LLC, an affiliate of MSFL and wholly owned subsidiary of Morgan Stanley, served as the agent for the offering.

The filing details that the price to public for each security is $1,000, with the agent receiving commissions and fees of $15 per security, resulting in proceeds to the issuer of $985 per security. The total commissions and fees for the offering amount to $81,285, with net proceeds to the issuer of $5,337,715. The estimated value on the pricing date was disclosed as $967.60 per security. These securities are part of MSFL's Series A Global Medium-Term Notes program and are registered under SEC Registration Statement Nos. 333-293641 and 333-293641-01.

Contingent Coupon Structure and Coupon Barrier Mechanics

The securities feature a contingent coupon mechanism that provides investors with an annual coupon rate of 13.90%, contingent upon the performance of the underlying Cadence Design Systems stock. The disclosure indicates that the contingent coupon will be paid on each coupon payment date, but only if the closing level of the underlier is greater than or equal to the coupon barrier level on the related observation date. The coupon barrier level has been set at $181.753, representing 55% of the initial level of $330.46 as measured on the strike date of July 23, 2026.

Critically, if on any observation date the closing level of the underlier falls below the coupon barrier level of $181.753, the issuer will pay no coupon with respect to the applicable interest period. This structure means that investors may receive no interest payments over the entire term of the securities if the stock price remains below the barrier level. The disclosure notes that if the closing level remains depressed throughout the security's life, investors could experience a complete loss of expected coupon income in addition to potential principal losses, creating a dual-risk scenario that investors must fully comprehend before committing capital.

Automatic Early Redemption Conditions and Call Threshold

The securities include automatic early redemption provisions that allow for potential early exit from the investment position if certain price thresholds are met. The securities are not subject to automatic early redemption until the first redemption determination date of January 25, 2027. On any redemption determination date thereafter—specifically January 25, 2027; February 23, 2027; March 23, 2027; April 23, 2027; May 24, 2027; June 23, 2027; and July 23, 2027—if the closing level of the underlier is greater than or equal to the call threshold level of $330.46 (100% of the initial level), the securities will be automatically redeemed.

Upon automatic early redemption, investors will receive an early redemption payment equal to the stated principal amount plus the contingent coupon with respect to the related interest period. Redemption dates corresponding to each determination date are scheduled for January 28, 2027; February 26, 2027; March 29, 2027; April 28, 2027; May 27, 2027; June 28, 2027; and July 28, 2027. The disclosure emphasizes that no further payments will be made on the securities once they have been automatically redeemed, effectively capping the total return for investors whose underlying stock appreciates sufficiently to trigger the call provision.

Maturity Payment Structure and Principal-at-Risk Design

The maturity payment structure creates a leveraged downside exposure for investors, distinguishing these securities from conventional debt instruments. If the securities have not been automatically redeemed prior to the maturity date of August 26, 2027, investors will receive a payment at maturity determined by comparing the final level (the closing level of the underlier on the final observation date of August 23, 2027) to the downside threshold level of $181.753. If the final level is greater than or equal to the downside threshold level of $181.753, investors will receive the stated principal amount, in addition to any contingent coupon payment with respect to the final observation date if that coupon is payable.

However, if the final level is less than the downside threshold level of $181.753, investors will receive a payment at maturity equal to the stated principal amount multiplied by the performance factor, defined as the final level divided by the initial level of $330.46. The disclosure explicitly states that under these circumstances, the payment at maturity will be significantly less than the stated principal amount and could be zero. This means that if Cadence Design Systems stock declines more than 45% from the strike date level, investors will experience a loss exceeding the coupon payments received, with total losses increasing in magnitude with each percentage point decline below the 55% threshold.

Initial Level and Strike Date Documentation

The initial level, which serves as the reference point for all calculations related to barrier levels, call thresholds, and performance factors, is established at $330.46. This level represents the closing price of Cadence Design Systems common stock on the strike date of July 23, 2026. All subsequent measurements of the underlier are evaluated against this established baseline to determine whether contingent coupons will be paid, whether automatic early redemption will be triggered, and what maturity payment an investor will receive.

The filing establishes clear definitions for key terms, stating that the coupon barrier level and downside threshold level are each set at $181.753, which represents 55% of the initial level. The call threshold level is set at $330.46, which represents 100% of the initial level. These percentage-based thresholds mean that the securities will perform differently depending on the magnitude and direction of stock price movements relative to the pricing date level. Investors should understand that the choice of the initial level as the call threshold means that any recovery of the stock price back to the pricing date level would trigger automatic redemption, capping potential gains.

Risks to Principal and Credit Exposure

The disclosure prominently features warnings regarding the risks associated with these principal-at-risk securities. The filing states that the securities do not guarantee the repayment of principal and do not provide for the regular payment of interest, with coupon payments being contingent on underlier performance. The securities are unsecured obligations of Morgan Stanley Finance LLC and are fully and unconditionally guaranteed by Morgan Stanley, meaning that all payments depend on the creditworthiness of Morgan Stanley itself. If Morgan Stanley were to default on its obligations, investors could lose some or all of their investment.

The announcement emphasizes that these securities are not secured obligations, and investors will not have any security interest in or access to any underlying reference asset. The filing notes that the securities are for investors who seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of losing a significant portion or all of their principal and the risk of receiving no coupons over the entire term. The disclosure stresses that investors will not participate in any appreciation of the underlier, limiting upside potential while maintaining full downside exposure within the specified thresholds.

Regulatory Status and Listing Information

The securities have been registered with the Securities and Exchange Commission under Registration Statement Nos. 333-293641 and 333-293641-01. The pricing supplement was filed pursuant to Rule 424(b)(2) and is dated July 23, 2026, with filing occurring on July 27, 2026. The announcement notes that the Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if the offering document or the accompanying product supplement, tax supplement, and prospectus is truthful or complete, with any representation to the contrary being a criminal offense under federal law.

The securities are identified by CUSIP number 61781G3C3 and ISIN US61781G3C36. The filing explicitly states that the securities will not be listed on any securities exchange, meaning they will be available for purchase and sale through secondary market channels but will not trade on a registered national securities exchange. The disclosure indicates that all relevant terms are described in the accompanying product supplement for Principal at Risk Securities dated April 8, 2026; tax supplement dated April 8, 2026; and prospectus dated April 8, 2026, which are incorporated by reference into the offering.

Distribution, Commissions, and Conflicts of Interest

Morgan Stanley & Co. LLC, functioning as the agent in this offering, will receive fixed sales commissions and fees of $15 per security sold, with selected dealers and their financial advisors collectively receiving this commission from the agent. The announcement discloses that the agent is an affiliate of Morgan Stanley Finance LLC and is a wholly owned subsidiary of Morgan Stanley. The filing notes that supplemental information regarding the plan of distribution and conflicts of interest is provided elsewhere in the documentation, recognizing that Morgan Stanley has multiple roles in both the issuance and distribution of these securities.

The structure of the offering, with the parent company guaranteeing the obligations of the subsidiary issuer and the subsidiary distributing the securities through a sister subsidiary serving as agent, creates multiple interconnected relationships within the Morgan Stanley corporate family. Investors should consider these structural relationships when evaluating the credit quality of the guarantee and when assessing potential conflicts of interest in the pricing and distribution of the securities. The filing indicates that additional information about plan of distribution and conflicts of interest is available in the accompanying product supplement.

Valuation and Pricing Considerations

The announcement provides an estimated value on the pricing date of $967.60 per security, which is approximately $32.40 below the $1,000 stated principal amount and offering price. This $32.40 discount, representing roughly 3.24% of the principal amount, reflects the value of the embedded options and the contingent nature of the coupon payments. The discount between the offering price and the estimated value provides insight into the embedded cost of the auto-callable feature and the contingent coupon structure from the perspective of pricing models used by the issuer.

Investors should understand that the estimated value reflects theoretical calculations based on pricing models and market conditions as of the pricing date. The actual economic value of the securities will fluctuate based on changes in the price of Cadence Design Systems stock, interest rate movements, volatility changes, and the credit spread associated with Morgan Stanley's guarantee. The pricing supplement does not disclose the specific pricing models, assumptions, or volatility inputs used to calculate the estimated value, meaning investors cannot fully replicate or verify the valuation calculation without access to additional proprietary information.