Morgan Stanley Launches $690,000 Auto-Callable Structured Notes Linked to S&P 500 Futures Index

Principal Amount and Pricing Structure of the New Securities Offering

Morgan Stanley Finance LLC issued the Contingent Income Auto-Callable Securities with a stated principal amount of $1,000 per security and an aggregate principal amount of $690,000, representing 690 individual securities. The securities were offered to the public at $1,000 per security, with Morgan Stanley & Co. LLC receiving commissions and fees totaling $40 per security, or $27,600 in aggregate. The net proceeds to Morgan Stanley Finance LLC from the offering totaled $662,400 after deducting agent commissions and fees.

The securities were priced on July 27, 2026, with an original issue date of July 29, 2026, and are scheduled to mature on July 30, 2031. The estimated value of each security on the pricing date was disclosed as $925.00 per security, which represents a discount to the $1,000 offering price. This valuation provides investors with information regarding the theoretical worth of the securities at issuance, though actual market value may differ following the issue date.

Contingent Coupon Payment Terms and Observation Mechanism

The securities provide for a contingent coupon at an annual rate of 12.35%, which represents a potentially above-market yield compared to conventional fixed-income securities. However, the coupon is contingent on a specific performance condition: the coupon will be paid only if the closing level of the underlier is greater than or equal to the coupon barrier level on each related observation date. If the closing level of the underlier falls below the coupon barrier level on any observation date, investors will receive no interest payment with respect to that interest period.

Coupon payments are scheduled to be made on multiple coupon payment dates throughout the five-year term of the securities, with observation dates aligned with these payment dates. The final coupon payment, if earned, shall be made on the maturity date of July 30, 2031. The disclosure states that if any coupon payment date is not a business day, the payment will be made on the next succeeding business day with no adjustment to the coupon amount. This structure means investors bear the risk of receiving no interest income for any or all interest periods if market conditions cause the underlying index to remain below the coupon barrier.

Automatic Early Redemption Provisions and Call Threshold Level

The securities feature automatic early redemption provisions that activate beginning on the first redemption determination date of January 27, 2027, with subsequent monthly redemption determination dates continuing through June 27, 2031. On each redemption determination date, if the closing level of the underlier is greater than or equal to the call threshold level of 2,934.063 (which represents 90% of the initial level), the securities will be automatically redeemed on the related early redemption date.

Upon automatic early redemption, investors receive the stated principal amount of $1,000 per security plus the contingent coupon with respect to the related interest period, if that coupon was earned. The disclosure specifies that no further payments will be made on the securities once they have been automatically redeemed. This structure creates the potential for investors to receive their principal and earned interest back well before the maturity date if the underlying index performs sufficiently well, but it also caps the potential upside since investors will not participate in any appreciation of the underlier beyond the redemption threshold.

Maturity Payment Terms and Principal-at-Risk Structure

If the securities have not been automatically redeemed prior to maturity and the final level of the underlier on July 28, 2031 (the final observation date) is greater than or equal to the downside threshold level, investors will receive the stated principal amount of $1,000 per security at maturity on July 30, 2031, in addition to the contingent coupon with respect to the final observation date, if payable. However, if the final level is less than the downside threshold level, the principal repayment is significantly reduced through a loss formula that applies a 1% loss for every 1% decline in the level of the underlier over the term of the securities.

The disclosure emphasizes that under these circumstances of final index decline below the downside threshold, the maturity payment will be significantly less than the stated principal amount and could be zero. This principal-at-risk feature means that investors who hold the securities to maturity face the risk of losing a substantial portion or their entire initial investment if the underlying index declines significantly from its initial level on the pricing date. The offering materials explicitly state that investors in the securities must be willing to accept the risk of losing their entire initial investment, highlighting the importance of this structural feature to potential purchasers.

Credit Risk and Guarantee Structure

The securities are unsecured obligations of Morgan Stanley Finance LLC and are fully and unconditionally guaranteed by Morgan Stanley, the parent company. However, the disclosure makes clear that all payments on the securities are subject to Morgan Stanley's credit risk. If Morgan Stanley defaults on its obligations under the securities or the guarantee, investors could lose some or all of their investment. The filing states that these securities are not secured obligations and investors will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.

The disclosure further clarifies 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, nor are they obligations of, or guaranteed by, a bank. This means that unlike bank deposits, investors in these securities will not benefit from FDIC deposit insurance protection, and their recovery in the event of Morgan Stanley's financial distress would depend on their status as unsecured creditors in any insolvency proceeding.

Underlying Index Methodology and Performance Measurement

The securities are based on the performance of the S&P 500 Futures 40% Intraday 4% Decrement VT Index, which is the specified underlier for purposes of measuring coupon payments, automatic early redemption, and final maturity payoffs. The strike date and pricing date for the securities were both July 27, 2026, establishing the initial reference level against which subsequent index performance is measured. The initial level of the underlier was used to calculate the call threshold level of 2,934.063, representing 90% of that initial closing level.

The closing level of the underlier on each observation date serves as the mechanism for determining whether contingent coupons are earned and whether automatic early redemption is triggered. The use of a 40% weighting and a 4% daily decrement adjustment in the index construction suggests a structured methodology designed to manage volatility and provide a specific performance characteristic. Investors should note that they will not participate in any appreciation of the underlier beyond the early redemption threshold, meaning gains in the index beyond the call threshold level of 2,934.063 will not result in additional payments to security holders.

Commissions, Distribution, and Morgan Stanley Affiliate Involvement

Morgan Stanley & Co. LLC, which serves as the agent for this offering, is an affiliate of Morgan Stanley Finance LLC and a wholly owned subsidiary of Morgan Stanley. Selected dealers and their financial advisors will collectively receive a fixed sales commission of $40 for each security sold, to be paid by the agent, Morgan Stanley & Co. LLC. This sales commission represents 4% of the $1,000 stated principal amount per security and is deducted from the offering proceeds before amounts are credited to Morgan Stanley Finance LLC.

The disclosure includes a supplemental section regarding the plan of distribution and conflicts of interest, noting that additional information regarding the distribution arrangements and potential conflicts is available in the accompanying product supplement. The fact that Morgan Stanley entities serve in multiple roles—as issuer, guarantor, and distribution agent—creates potential conflicts of interest that investors should consider. The structure allows Morgan Stanley to profit from the spread between the issue price and the proceeds received, as well as from the sales commissions paid to dealers.

Risk Factors and Investor Suitability Considerations

The offering materials emphasize that the securities involve risks not associated with an investment in ordinary debt securities. The securities are explicitly described as being suitable only 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 of the securities. The disclosure states unequivocally that investors will not participate in any appreciation of the underlier and must be willing to accept the risk of losing their entire initial investment.

The principal-at-risk structure creates several specific risk scenarios. First, if the underlying index falls below the coupon barrier on any observation date, investors receive zero interest income for that period, even if the index remains above the downside threshold at maturity. Second, if the index closes below 2,934.063 (the call threshold) on all redemption determination dates, the securities will not be called and investors must hold them until maturity, extending their exposure. Third, if the index falls below the downside threshold by maturity, investors face substantial principal loss according to the 1% loss per 1% decline formula. The combination of these risks makes the securities appropriate only for sophisticated investors with high risk tolerance and the ability to afford potential total loss of their investment.

Term, Maturity Schedule, and Redemption Determination Timeline

The securities have a five-year term, with the final observation date scheduled for July 28, 2031, and the maturity date of July 30, 2031. The redemption determination dates begin on January 27, 2027, and continue on a monthly basis through June 27, 2031, providing 52 redemption determination dates over the life of the securities. Each redemption determination date is followed by a corresponding early redemption date when, if applicable, the securities would be redeemed and investors would receive their early redemption payment.

The disclosure specifies that all redemption determination dates and the final observation date are subject to postponement for non-trading days and certain market disruption events. This means that if a scheduled determination date falls on a non-business day or if market disruption events occur, the determination may be postponed to the next applicable business day or the determination may be made under alternative rules specified in the product supplement. The extended timeline of monthly determination dates provides multiple opportunities for investors to have their securities called if index performance is sufficiently strong, or conversely, multiple opportunities for coupons to be forfeited if index performance fails to meet the coupon barrier.

Registration and Regulatory Status of the Securities Offering

The securities are issued under Registration Statement Nos. 333-293641 and 333-293641-01 filed with the Securities and Exchange Commission. The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, which allows for the public offering of securities on the basis of a base prospectus and a pricing supplement. The securities are part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, which is a framework under which the company may issue various types of structured notes and other medium-term securities.

The disclosure clearly states that the SEC and state securities regulators have not approved or disapproved these securities, or determined if the pricing supplement, product supplement, index supplement, tax supplement, and prospectus are truthful or complete. Any representation to the contrary is characterized as a criminal offense. Investors are directed to read the pricing supplement together with the related product supplement dated April 8, 2026, index supplement dated April 8, 2026, tax supplement dated April 8, 2026, and prospectus dated April 8, 2026, which provide detailed terms and risk disclosures regarding the securities.