Morgan Stanley Finance Launches $4.5M Auto-Callable Jump Securities Linked to Dow, Nasdaq-100, and Russell 2000

Security Structure and Maturity Details

Morgan Stanley Finance LLC structured these securities to offer investors multiple outcomes based on the performance of three underlying equity indices over a five-year term. Each security was issued at $1,000, totaling $4.522 million. The issue date was July 24, 2026, following pricing on July 21, 2026, which also served as the strike date. The securities mature on July 24, 2031, with the final payment determined by the closing levels of the Dow Jones Industrial Average, Nasdaq-100, and Russell 2000 on July 21, 2031.

An automatic early redemption feature allows the securities to be redeemed before maturity if all three indices meet or exceed their call threshold levels on the first determination date, July 28, 2027. In such a case, investors receive $1,170 per security on August 2, 2027, providing a potential return within approximately one year. No further payments are made after early redemption.

Linkage to Multiple Indices and Thresholds

The securities are linked to the Dow Jones Industrial Average, Nasdaq-100 Index, and Russell 2000 Index, with initial levels on July 21, 2026, set at 52,224.64, 29,155.18, and 2,987.395 respectively. These initial levels serve as baselines for measuring performance at maturity. Early redemption requires all indices to reach at least 100% of their initial levels by July 28, 2027.

Returns are tied to the worst-performing index rather than offering diversification benefits. A decline in any single index below its downside threshold adversely affects returns, regardless of other indices’ performance. This worst-performer approach exposes investors to asymmetric risk compared to investing in a single index.

Upside Participation and Early Redemption Benefits

The securities provide a 200% participation rate on the upside performance of the worst-performing index if all three indices finish above their initial levels at maturity. For example, a 10% gain in the worst-performing index would yield $1,200 per security ($1,000 principal plus $200 upside). Early redemption offers a $1,170 payment per security if all indices meet thresholds by July 28, 2027, representing a 17% return in about one year.

The 200% participation rate compensates for principal risk and concentration on the worst-performing index. The estimated value at pricing was $952.50 per security, reflecting embedded risks and option costs as of July 21, 2026.

Downside Risk and Potential Principal Loss

Investors face significant downside risk if any index falls below 70% of its initial level: 36,557.248 for Dow Jones, 20,408.626 for Nasdaq-100, and 2,091.177 for Russell 2000. Losses equal 1% for every 1% decline below this threshold, with maturity payments calculated by multiplying principal by the worst-performing index’s performance factor.

Payments can fall well below the $1,000 principal and may reach zero if an index drops 100%. If indices close between 70% and 100% of initial levels, investors receive only principal without upside. The securities are designed for investors willing to risk principal and forgo current income, accepting the possibility of total loss based on index performance.

Credit Risk and Unsecured Obligations

While Morgan Stanley Finance LLC issues the securities, Morgan Stanley fully and unconditionally guarantees them, providing credit support. However, payments depend on Morgan Stanley’s creditworthiness, and default could result in partial or total loss. The securities are unsecured obligations without claim on underlying assets.

These securities are not bank deposits, are uninsured by the FDIC or any government agency, and are not bank obligations. In bankruptcy or financial distress scenarios, investors rank as general unsecured creditors, potentially recovering only a fraction of their investment.

Distribution and Commission Details

Morgan Stanley & Co. LLC, an affiliate and wholly owned subsidiary of Morgan Stanley Finance LLC, acts as the agent for this offering. Securities are priced at $1,000 each, totaling $4.522 million. Agent commissions and fees amount to $36.25 per security, or $163,922.50 total. Net proceeds to Morgan Stanley Finance LLC after commissions are $963.75 per security, or $4,358,077.50 total. Selected dealers and advisors receive fixed sales commissions of $36.25 per security.

The offering includes a $0.50 per security fee paid to a third-party data analytics provider at the request of a third-party dealer, who is also a permitted user of the analytics. Morgan Stanley disclaims warranties regarding the analytics’ use or suitability. This fee is part of the broader distribution and marketing costs.

Regulatory Status and Securities Classification

These notes are issued under Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program, registered under numbers 333-293641 and 333-293641-01. The pricing supplement was filed under SEC Rule 424(b)(2) on July 23, 2026, following pricing on July 21, 2026. Neither the SEC nor state regulators have approved or disapproved the securities or verified the completeness of offering documents. The securities are not listed on any exchange and trade over-the-counter.

The securities carry CUSIP 61781HMR7 and ISIN US61781HMR74. As principal-at-risk structured notes, they require thorough review of all offering documents to understand their complex risk-return profile. The SEC warns that claims of regulatory approval constitute a criminal offense, highlighting the importance of accurate disclosures.

Risks from Worst-Performing Index Exposure

Linking returns to the worst-performing of three indices introduces concentration risk, differing from diversified or single-index investments. Underperformance by one index determines final payments regardless of others’ gains. The investment exposes investors to combined risks across large-cap (Dow Jones), tech-heavy mid-cap (Nasdaq-100), and small-cap (Russell 2000) segments. A sharp decline in any segment triggers losses despite positive returns elsewhere.

The 70% downside threshold offers some protection against moderate declines, allowing principal recovery if the worst-performing index closes between 70% and 100% of initial levels. Below 70%, losses accelerate rapidly. These securities target sophisticated investors willing to risk principal and forgo income for potential upside via auto-callable features and enhanced participation.

Tax Treatment and Offering Documentation

These principal-at-risk notes have complex tax implications that may differ from traditional debt or equity. Morgan Stanley Finance LLC provided a tax supplement dated April 8, 2026, detailing tax considerations for various investors. The product supplement, index supplement, and prospectus dated April 8, 2026, outline mechanics, pricing, and terms. Investors should review all documents carefully before investing.

Performance Monitoring and Determination Process

Performance is assessed on specified determination dates, with adjustments for non-trading days or market disruptions. The first determination date is July 28, 2027, to evaluate automatic early redemption eligibility based on indices closing at or above 100% of initial levels. If met, early redemption occurs August 2, 2027, paying $1,170 per security. Otherwise, securities continue to maturity on July 24, 2031.

On the final determination date, July 21, 2031, Morgan Stanley Finance LLC calculates each index’s closing level to identify the worst-performing index. Payment scenarios include principal plus upside if all indices exceed initial levels, principal only if indices remain above 70% but below initial levels, or principal multiplied by worst-performing index’s performance factor if any index falls below 70%. Final payments are delivered on July 24, 2031, concluding the five-year term.