Morgan Stanley Issues $11.5 Million Callable Contingent Income Securities Linked to Three Market Indexes

Structured Product Characteristics and Investor Risk Profile

The securities represent a structured investment product designed for investors seeking above-market income in exchange for principal risk exposure. Morgan Stanley Finance LLC, fully and unconditionally guaranteed by Morgan Stanley, issued the notes as part of the issuer's Series A Global Medium-Term Notes program. The securities do not guarantee repayment of principal and do not provide regular interest payments; instead, they feature a contingent coupon mechanism with strict conditions for payment. Each security carries a stated principal amount of $1,000, with an aggregate issuance of $11.534 million representing 11,534 securities sold at par value.

The investment structure targets investors willing to assume significant downside risk in exchange for the potential to earn the 20.30% annual contingent coupon. The disclosure notes that investors in these securities must accept the risk of losing their entire initial investment based on the performance of any single underlier. Since the securities are linked to the worst-performing asset among three different market indexes and an exchange-traded fund, diversification across multiple benchmarks does not provide protective benefits; rather, it expands the number of potential triggers for adverse outcomes. The securities do not offer participation in any appreciation of the underlying assets, meaning investors receive no upside benefit regardless of how well the indexes perform.

Contingent Coupon Mechanism and Payment Conditions

The contingent coupon will pay at an annual rate of 20.30%, but only if the closing level of each underlier is greater than or equal to its coupon barrier level on the related observation date. If the closing level of any single underlier falls below its coupon barrier level on any observation date, the investor will receive no interest with respect to the related interest period. This all-or-nothing structure means that a decline in even one of the three underlying assets beyond its specified barrier can eliminate coupon payments entirely, regardless of the performance of the other two underliers. The observation dates and corresponding coupon payment dates are established in the supplemental documentation accompanying this offering.

The contingent coupon structure differs substantially from traditional fixed-income securities, where investors typically receive regular interest payments regardless of market conditions. In this case, the generous 20.30% annual rate compensates for the significant probability that coupon payments may be withheld during one or more payment periods. Investors receive coupon payments only when all three underliers simultaneously meet their respective coupon barrier thresholds, a condition that becomes increasingly difficult to satisfy as market volatility affects any of the three assets. The company did not disclose the specific coupon barrier levels for each underlier in this pricing supplement.

Principal-at-Risk Mechanism at Maturity

If the securities have not been redeemed prior to maturity and the final level of each underlier is greater than or equal to its downside threshold level, investors will receive the stated principal amount at maturity in addition to any contingent coupon payment due with respect to the final observation date. However, if the final level of any underlier is less than its downside threshold level, investors will lose one percent for every one percent decline in the level of the worst-performing underlier over the term of the securities. This design exposes investors to dollar-for-dollar principal loss corresponding to the percentage decline of whichever asset among the three underperforms most severely. Under adverse market conditions, the payment at maturity could be significantly less than the stated principal amount and could theoretically reach zero.

The maturity date is scheduled for July 20, 2029, with a final observation date of July 17, 2029, subject to postponement for non-trading days and certain market disruption events. The disclosure emphasizes that the value of the securities is based on the worst-performing underlier, meaning that regardless of how the Nasdaq-100 Index and Russell 2000 Index perform, investors bear full downside exposure to the single weakest asset among the three. If the VanEck Semiconductor ETF, for example, declines 40% while the other two indexes remain relatively stable, investors would experience a 40% loss of principal at maturity. The company did not disclose the specific downside threshold levels for each underlier.

Early Redemption Features and Callable Structure

Morgan Stanley retains the right to redeem the securities early on any redemption date beginning January 22, 2027. Early redemption occurs if and only if the output of a risk-neutral valuation model indicates that redeeming on such date is economically rational for Morgan Stanley compared to not redeeming. The determination date for this calculation must be no earlier than three business days before the observation date preceding the redemption date and no later than such observation date. The model takes as input prevailing reference market levels, volatilities, correlations, and Morgan Stanley's credit spreads as of the pricing date. If the securities are called, Morgan Stanley will notify investors no later than the observation date preceding the specified redemption date.

The callable feature gives Morgan Stanley asymmetric economic benefits. If market conditions become favorable for the issuer—such as when volatility declines or credit spreads tighten—the risk-neutral valuation model output may indicate that redemption is economically advantageous. Investors would then receive the redemption payment equal to the stated principal amount plus any contingent coupon due, but would forfeit any remaining upside potential if the underlying assets subsequently appreciate significantly. An early redemption of the securities will not automatically occur based on the performance of the underliers themselves; rather, it depends entirely on the calculations embedded in Morgan Stanley's valuation model and the issuer's assessment of its own economic interest. Redemption dates are scheduled monthly from January 22, 2027, through June 22, 2029.

Underlying Assets and Index-Based Structure

The securities are linked to three underlying assets: the Nasdaq-100 Index (NDX Index), the Russell 2000 Index (RTY Index), and the VanEck Semiconductor ETF (SMH Fund). The Nasdaq-100 Index comprises the 100 largest nonfinancial companies listed on the NASDAQ stock exchange, representing major technology and growth-oriented firms. The Russell 2000 Index tracks small-cap U.S. equities, offering exposure to a different market segment than the large-cap Nasdaq-100. The VanEck Semiconductor ETF provides concentrated exposure to semiconductor companies, a sector within the broader technology landscape. Each of these underliers carries distinct risk characteristics and performance drivers, yet investors bear the consequences of whichever asset performs worst relative to its specified thresholds.

The strike date and pricing date for these securities were July 17, 2026, with an original issue date of July 22, 2026. By linking the securities to the worst-performing underlier among three separate market benchmarks and a specialized fund, Morgan Stanley structured a product where a decline in any single asset—even if the other two remain stable or appreciate—can adversely affect investor returns. The disclosure notes explicitly that the fact the securities are linked to more than one underlier does not provide asset diversification benefits; instead, it means that a decline in any underlier beyond its coupon barrier level and/or downside threshold level will harm investor outcomes. The company did not disclose historical volatility, correlation assumptions, or performance characteristics of these three underliers in the pricing supplement.

Pricing, Commissions, and Estimated Value

The securities were priced at $1,000 per security, with an aggregate principal amount of $11.534 million. Morgan Stanley & Co. LLC served as the agent for the offering and received commissions and fees of $7.50 per security, or $86,505 in total, resulting in net proceeds to Morgan Stanley Finance LLC of $992.50 per security, or $11.447 million in aggregate. The securities will be sold only to investors purchasing in fee-based advisory accounts, a restriction limiting distribution to a specific investor class.

The estimated value of the securities on the pricing date was $980.30 per security, reflecting the difference between the $1,000 issue price and the estimated fair value based on Morgan Stanley's valuation models. This discount of approximately $19.70 per security indicates that the market value of the contingent income stream, combined with the principal-at-risk features, was assessed at below par value at the time of pricing. The pricing supplement confirms that Morgan Stanley & Co. expected to sell the securities to an unaffiliated dealer at $992.50 per security for further sale to fee-based advisory accounts at the public price of $1,000 per security. This structure separates the agent from direct sales responsibilities while maintaining the wholesale and retail pricing tiers.

Credit Risk and Guarantee Structure

All payments on the securities are subject to Morgan Stanley's credit risk. The securities are unsecured obligations of Morgan Stanley Finance LLC and are fully and unconditionally guaranteed by Morgan Stanley, the parent company. If Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. These securities are not secured obligations, and investors will not have any security interest in or access to any underlying reference asset or assets. The guarantee from Morgan Stanley extends to both the principal repayment and any contingent coupon payments owed under the terms of the securities.

The disclosure emphasizes that the securities do not represent deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Investors depend entirely on Morgan Stanley's creditworthiness and continued ability to meet its obligations. In the event of Morgan Stanley's financial distress, insolvency, or default, the claim of these security holders would be unsecured and would rank alongside other unsecured creditors. The valuation of the securities incorporates Morgan Stanley's credit spreads as of the pricing date into the risk-neutral model used to determine early redemption eligibility. Any deterioration in Morgan Stanley's credit quality after issuance could negatively affect the market value of the securities, even if the underlying indexes remain unchanged.

Risk Factors and Investor Suitability

The securities involve risks not associated with investment in ordinary debt securities. These risks include the potential loss of a significant portion or all of the investor's principal, the possibility of receiving no coupons over the entire term of the securities, and the risk of early redemption based on the output of Morgan Stanley's risk-neutral valuation model. The structured nature of the product means that investors do not participate in appreciation of any underlier and instead accept a bounded upside (the contingent coupon) in exchange for uncapped downside exposure. Investors who purchase these securities must be willing to accept substantial volatility risk across three different market indexes and funds.

The pricing supplement notes that these securities are intended for investors seeking an opportunity to earn interest at a potentially above-market rate in exchange for principal risk. However, the realization of above-market returns depends on the concurrent satisfaction of coupon barrier conditions across all three underliers throughout the entire holding period or until early redemption. Investors face the risk that market conditions deteriorate for semiconductor companies, small-cap stocks, or large-cap nonfinancial companies—the three segments represented by the underliers—thereby triggering coupon payment forfeiture or principal loss at maturity. The company did not disclose historical default rates, loss scenarios under specific market stress conditions, or detailed sensitivity analyses in this pricing supplement.

Registration and Regulatory Framework

The securities are registered under Registration Statement Nos. 333-293641 and 333-293641-01. The pricing supplement was filed pursuant to Securities and Exchange Commission Rule 424(b)(2) and is dated July 17, 2026. The accompanying documentation includes a product supplement dated April 8, 2026, an index supplement dated April 8, 2026, a tax supplement dated April 8, 2026, and a prospectus dated April 8, 2026. These documents collectively provide the complete terms and conditions governing the securities.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined whether the pricing supplement and accompanying documentation are truthful or complete. The offering is subject to standard securities laws and regulations applicable to structured products issued in the United States. Investors are advised to read all accompanying documentation before making an investment decision, as the pricing supplement represents only the current offering terms and conditions without presuming any regulatory endorsement of the product's suitability or risk profile for any particular investor category.