Morgan Stanley Launches Jump Securities with Auto-Callable Feature Linked to Three Major Indices

Structure of the Jump Securities Offering

Morgan Stanley Finance LLC, a subsidiary of Morgan Stanley, disclosed the pricing of Jump Securities with Auto-Callable Feature in a 424B2 prospectus supplement dated July 23, 2026. The offering comprises $662,000 in aggregate principal amount, with each security carrying a stated principal amount of $1,000 and an issue price of $1,000 per security. The securities are fully and unconditionally guaranteed by Morgan Stanley, meaning that all payments are backed by the parent company's credit. The disclosure indicates that these are unsecured obligations of MSFL and do not guarantee repayment of principal or provide regular interest payments.

The securities were priced on July 23, 2026, with an original issue date of July 28, 2026, and a maturity date of July 26, 2029, representing a three-year investment period. The estimated value on the pricing date was disclosed as $957.50 per security. Commissions and fees totaled $19,860, with selected dealers and their financial advisors receiving a fixed sales commission of $30 per security from the agent, Morgan Stanley & Co. LLC. The company received proceeds of $642,140 after deducting agent commissions and fees from the gross offering amount.

Underlying Indices and Initial Level Determination

The securities are linked to three major equity market indices: the Dow Jones Industrial Average (INDU Index), the Nasdaq-100 Index (NDX Index), and the Russell 2000 Index (RTY Index). The filing discloses that the initial levels for each index were established on the strike date of July 23, 2026. The INDU Index initial level was set at 51,711.65, the NDX Index at 28,454.81, and the RTY Index at 2,940.163. These levels serve as the reference points against which the securities' performance will be measured throughout the investment term.

The disclosure notes that investors should understand that while the securities are linked to three separate indices, this structure does not provide asset diversification benefits. Instead, the filing explicitly states that a decline in any single index beyond its downside threshold will adversely affect returns on the securities, regardless of performance in the other two indices. This is because the securities' payment structure is based on the worst performing of the three underliers, meaning that investors' returns are entirely dependent on whichever index shows the lowest percentage change from its initial level to its final level.

Auto-Callable Feature and Early Redemption Mechanics

The securities incorporate an auto-callable feature that allows for automatic early redemption if specific performance conditions are met. According to the filing, the first determination date when early redemption becomes possible is July 30, 2027, approximately one year after the original issue date. The call threshold level for each index is set at 100% of its respective initial level, meaning that all three indices must close at or above their July 23, 2026 levels on a determination date to trigger automatic early redemption.

If the closing level of each underlier is greater than or equal to its call threshold level on any determination date, the securities will be automatically redeemed for an early redemption payment. The disclosure indicates that the early redemption payment will correspond to a return of approximately 17.00% per annum, with specific payment amounts to be determined based on the number of determination dates that have elapsed. The filing specifies that determination dates and early redemption dates are subject to postponement for non-trading days and certain market disruption events. Once the securities are automatically redeemed, no further payments will be made and the investment terminates.

Downside Protection Levels and Principal Risk Scenarios

The securities establish downside threshold levels at 70% of each index's initial level. For the INDU Index, the downside threshold is 36,198.155; for the NDX Index, it is 19,918.367; and for the RTY Index, it is 2,058.114. The filing discloses that if the final level of any underlier is equal to or less than its initial level but all underliers remain at or above their respective downside thresholds at maturity, investors will receive only the stated principal amount with no additional upside payment.

However, if the final level of any underlier falls below its downside threshold level, investors face significant principal losses. Under this scenario, the filing states that investors will lose 1% for every 1% decline in the level of the worst performing underlier over the term of the securities. This means that payment at maturity will be calculated by multiplying the stated principal amount by the performance factor of the worst performing index. The disclosure explicitly warns that under these circumstances, "the payment at maturity will be significantly less than the stated principal amount and could be zero," emphasizing that investors could lose their entire initial investment.

Upside Participation Terms at Maturity

If the securities reach maturity without being automatically redeemed and the final level of each underlier is greater than its respective initial level, investors will receive the stated principal amount plus an upside payment. The disclosure defines the upside payment as the stated principal amount multiplied by a participation rate of 150% multiplied by the underlier percent change of the worst performing underlier.

The participation rate of 150% means that investors will receive 1.5 times the percentage gain of the worst performing index. For example, if all three indices appreciate but the worst performer gains 10%, investors would receive their stated principal of $1,000 plus an upside payment of $1,000 × 150% × 10% = $150, for a total payment of $1,150 at maturity. The filing emphasizes that this upside is based on the worst performing index, not the best or average performer, which aligns with the principal-at-risk structure of these securities.

Credit Risk and Guarantee Structure

The filing discloses that all payments on the securities are subject to the credit risk of Morgan Stanley and MSFL. The document explicitly states that "If we default on our obligations, you could lose some or all of your investment." This language indicates that while Morgan Stanley provides a full and unconditional guarantee, the strength of that guarantee depends entirely on Morgan Stanley's ability to meet its financial obligations. The securities are not secured obligations, meaning investors do not have any security interest in or access to any underlying reference asset or assets.

The disclosure notes 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 clarification distinguishes these structured investments from traditional bank deposits, which would carry FDIC insurance protection up to applicable limits. Investors are relying solely on Morgan Stanley's creditworthiness and willingness to pay at maturity or upon early redemption.

Observation Date and Maturity Payment Determination

The filing specifies that the observation date for determining final levels of the three indices is July 23, 2029, subject to postponement for non-trading days and certain market disruption events. This date, which falls three days before the stated maturity date of July 26, 2029, marks the final measurement point for calculating whether investors receive upside payments, principal only, or principal with losses. The closing levels of all three indices on this observation date will be used to determine the final level for each underlier and to identify the worst performing index.

The maturity payment structure outlined in the filing creates three possible outcomes at this observation date. If all three indices finish higher, investors receive principal plus upside. If at least one index has declined but all remain above the 70% downside threshold, investors receive principal only with no loss. If any index falls below its 70% threshold, investors experience losses based on the worst performer's decline relative to its initial level. The disclosure makes clear that investors should fully understand these payment scenarios before committing capital to this investment.

Distribution and Issuance Details

Morgan Stanley & Co. LLC, an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, served as the agent for the offering. The disclosure states that selected dealers and their financial advisors will collectively receive a fixed sales commission of $30 for each security sold to customers, payable by the agent. This commission structure provides compensation to the intermediaries distributing these securities in the marketplace. The filing notes that for additional information regarding the plan of distribution and conflicts of interest, investors should refer to the accompanying product supplement.

The securities are issued as part of MSFL's Series A Global Medium-Term Notes program, as disclosed in the filing. The CUSIP number for the securities is listed as 61781GM32, which allows investors to identify and track these specific instruments in the marketplace. The disclosure indicates that the offering was made pursuant to Rule 424(b)(2) under the Securities Act, with registration statement numbers 333-293641 and 333-293641-01, and that the prospectus supplement was based on existing product supplement, index supplement, tax supplement, and prospectus documents dated April 8, 2026.

Risk Factors and Investor Suitability

The filing emphasizes that the securities involve risks not associated with an investment in ordinary debt securities. The disclosure is explicit that these instruments are designed "for investors who are willing to risk their principal and forgo current income in exchange for the possibility of receiving an early redemption payment or payment at maturity that exceeds the stated principal amount." This statement indicates that potential investors must be comfortable accepting the possibility of substantial losses in exchange for the opportunity for above-market returns.

The disclosure further notes that "Investors in the securities must be willing to accept the risk of losing their entire initial investment based on the performance of any underlier." This language underscores that a significant decline in any one of the three indices could result in a total loss of the investor's capital. The filing's emphasis on the worst performing underlier mechanism and the 70% downside threshold indicates that these securities are not appropriate for conservative investors or those seeking capital preservation. The structure is intended for sophisticated investors with the capacity to absorb significant losses and the understanding that they are providing indirect leverage to Morgan Stanley's portfolio hedging strategies.