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Morgan Stanley Finance LLC has introduced $1.118 million in fixed income auto-callable securities maturing on July 21, 2031, as detailed in a pricing supplement dated July 16, 2026. Fully backed by Morgan Stanley, these structured notes offer an 8.00% fixed annual coupon and incorporate principal-at-risk features linked to the S&P 500 Futures 40% Intraday 4% Decrement VT Index performance. The notes include automatic early redemption options starting July 16, 2027, while exposing investors to significant downside risk if the index falls below predetermined levels at maturity.
Key Points
- NYSE Ticker: MS-PQ
- Morgan Stanley Finance LLC issued $1.118 million aggregate principal amount of auto-callable structured notes guaranteed by Morgan Stanley
- Offers an 8.00% fixed annual coupon with an original issue date of July 21, 2026, and maturity on July 21, 2031
- Principal-at-risk structure entails a 1% principal loss for every 1% decline of the underlying index below the downside threshold, up to a total principal loss
- Automatic early redemption commences July 16, 2027, with monthly evaluation dates if the index closes at or above the call threshold of 3,504.76
Auto-Callable Securities Structure and Terms
The securities were issued at par with a stated principal amount of $1,000 each, totaling 1,118 notes and an aggregate principal of $1.118 million. The pricing date was July 16, 2026, with issuance on July 21, 2026, and maturity set for July 21, 2031, offering a five-year investment period. Monthly coupon payments are scheduled for the 21st of each month or the next business day if the date is not a business day.
These notes reference the S&P 500 Futures 40% Intraday 4% Decrement VT Index, with the strike date coinciding with the pricing date of July 16, 2026. The initial index level and call threshold are both set at 3,504.76, representing 100% of the index's starting value. The final index level will be observed on July 16, 2031, subject to adjustments for non-trading days or market disruptions as outlined in the offering documents.
Fixed Coupon and Early Redemption Features
Investors receive an 8.00% fixed annual coupon paid monthly unless the notes are redeemed early. Coupon payments continue until automatic redemption occurs, after which no further coupons are paid. Early redemption evaluations begin on July 16, 2027, with monthly checks through June 17, 2031. If the index closes at or above 3,504.76 on any redemption date, the notes redeem early at par plus accrued coupon for that period, allowing investors to recover principal and earned interest if the index maintains or exceeds its initial level. No redemption occurs before July 16, 2027.
Principal-at-Risk and Downside Exposure
These notes carry principal-at-risk characteristics, differing from traditional debt instruments. If not redeemed early and the final index level on July 16, 2031, is at or above the downside threshold, investors receive full principal plus the final coupon. However, if the index closes below this threshold, investors incur losses proportional to the index decline—losing 1% of principal for every 1% drop—potentially resulting in total principal loss despite receiving the last coupon payment.
This structure means investors bear full downside risk without participation in any index appreciation beyond the early redemption scenarios.
Pricing and Distribution Details
The notes were offered at $1,000 each, totaling $1.118 million for 1,118 securities. Morgan Stanley & Co. LLC, acting as agent, earned commissions of $41.50 per note, totaling $46,397. Selected dealers and financial advisors received the same fixed commission per security. Net proceeds to Morgan Stanley Finance LLC were $1,071,603 after deducting agent fees.
The pricing supplement indicates an estimated value of $912.20 per note on the pricing date, reflecting an $87.80 discount to par. This discount accounts for the embedded costs of the automatic early redemption option and principal-at-risk features, meaning investors paid par for securities valued below par at issuance due to structural complexities.
Credit Risk and Guarantee Information
These unsecured notes are obligations of Morgan Stanley Finance LLC and are fully and unconditionally guaranteed by Morgan Stanley. All payments depend on Morgan Stanley’s creditworthiness, exposing investors to potential losses if the parent company defaults. The notes are not secured by any collateral or underlying assets.
Issued under Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program, the parent company guarantee provides credit support but remains subject to Morgan Stanley’s financial condition. The notes are not deposits, savings accounts, nor insured by the FDIC or any government agency.
Investor Risk Profile and Suitability
These securities target investors seeking potentially above-market interest income in exchange for significant principal risk. The 8.00% fixed coupon compensates for the risk of partial or total principal loss. Investors must be willing to accept the possibility of losing their entire investment, as the notes do not participate in index gains beyond early redemption and carry asymmetric risk profiles compared to traditional fixed income or equity investments.
Underlying Index and Performance Measurement
The referenced index is the proprietary S&P 500 Futures 40% Intraday 4% Decrement VT Index, which allocates 40% to intraday S&P 500 Futures with a 4% daily decrement, modifying the return profile relative to the standard S&P 500 Index. The strike date and initial index level were set on July 16, 2026, at 3,504.76.
The final level, determining maturity payment, will be the closing index level on July 16, 2031. This single observation date means the entire five-year principal risk depends on the index level at maturity, with no protection against interim declines that recover before the observation date.
Monthly Coupon Payment Schedule
Coupons are paid monthly on the 21st calendar day at an 8.00% annual rate, or the next business day if the 21st is not a business day. The final coupon payment occurs on the maturity date, July 21, 2031, including accrued interest for the last period. This schedule provides consistent income throughout the five-year term unless early redemption occurs.
Redemption Timeline and Process
There are 48 scheduled redemption determination dates from July 16, 2027, through June 17, 2031, adjusted for non-trading days and market disruptions. On each date, if the index closes at or above 3,504.76, the notes redeem automatically five business days later, with the earliest redemption on July 21, 2027.
This schedule offers Morgan Stanley Finance LLC multiple early exit opportunities, limiting upside for investors while protecting the issuer’s downside. Investors face uncertainty regarding the final maturity date due to potential early calls after July 2027.
Regulatory Filing and Disclosure Information
The securities were filed under Rule 424(b)(2) with Registration Statement Nos. 333-293641 and 333-293641-01, accompanied by the July 16, 2026 pricing supplement. The offering is part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program. Disclosure documents include the product, index, tax supplements, and prospectus dated April 8, 2026.
The SEC and state regulators have neither approved nor disapproved the securities or verified the completeness of offering documents. Investors are advised to review all related documents thoroughly to understand the terms, risks, principal-at-risk mechanics, and credit exposure before investing.
