Morgan Stanley Finance LLC Introduces $1.05 Million Principal-at-Risk Structured Notes Tied to S&P 500 Index

Investment Structure and Index Details

Issued under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, these Enhanced Trigger Jump Securities use the S&P 500 Index as the underlying reference. The initial index level was 7,572.40, set on the strike date of July 15, 2026. The downside threshold is 6,436.54, exactly 85% of the initial level, defining the boundary between protected and principal loss scenarios.

The final index level will be observed on August 16, 2027, with maturity three days later on August 19, 2027. The investment term officially starts on the original issue date, July 21, 2026, following pricing on July 16, 2026, establishing the performance measurement period.

Upside Payment and Protection Features

If the S&P 500 Index closes at or above 6,436.54 on the observation date, investors receive the full $1,000 principal plus a fixed $100.40 upside payment per security, representing a 10.04% return. This capped upside limits returns regardless of how much the index appreciates, as illustrated by hypothetical scenarios where even a 100% index gain results in only the fixed upside payment.

This structure targets investors willing to forgo current income and returns beyond the capped upside in exchange for limited principal loss protection within a defined performance range, reflecting a trade-off between profit potential and downside buffer.

Downside Risk and Principal Loss Details

If the final index level falls below 6,436.54 at maturity, investors incur principal losses proportional to the index decline. The maturity payment equals the stated principal multiplied by the performance factor (final level divided by initial level), meaning every 1% index drop below the threshold results in a 1% principal loss.

The pricing supplement warns that payments could be significantly less than principal or even zero if the index declines substantially below the initial level. The 15% downside buffer offers limited protection only for declines up to 15%, with losses increasing beyond that.

Issuance Details and Distribution

The offering comprises 1,050 securities at $1,000 principal each, totaling $1,050,000. The public issue price was $1,000 per security, with agent commissions and fees totaling $10.42 per $1,000 principal, amounting to $10,941 overall. Net proceeds to Morgan Stanley Finance LLC were $1,039,059 after fees.

Morgan Stanley & Co. LLC acted as the distribution agent, with J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. serving as placement agents. Placement agents waived fees for certain fiduciary account sales. The securities are not exchange-listed and are sold through the issuer’s distribution network.

Pricing and Valuation Methodology

On the pricing date, the securities’ estimated value was $986.40, $13.60 below the offering price, reflecting issuance, selling, structuring, and hedging costs borne by investors. Morgan Stanley’s valuation incorporates the debt and performance components linked to the S&P 500 Index, using internal pricing models, market inputs, volatility assumptions, interest rates, and credit spreads.

The internal funding rate used is likely lower than secondary market credit spreads, benefiting the issuer. Secondary market prices may be lower than the estimated value due to credit spreads and bid-offer spreads.

Credit Guarantee and Obligation Structure

The notes are unsecured obligations of Morgan Stanley Finance LLC, fully and unconditionally guaranteed by Morgan Stanley. Payments depend on Morgan Stanley’s creditworthiness; default could lead to total or partial investment loss. Investors have no claim on the S&P 500 Index or its assets, relying solely on Morgan Stanley’s general credit obligation.

These securities are not bank deposits, are not FDIC insured, and are not guaranteed by any bank or governmental agency.

Target Investors and Risk Considerations

The securities suit investors seeking returns linked to the underlier who accept principal risk, no current income, and capped upside in exchange for limited principal loss protection within a specified performance range. The pricing supplement repeatedly warns investors must be willing to risk their entire initial investment.

These zero-coupon notes offer no interest and no guaranteed principal return, with maximum returns capped at 10.04% and potential losses up to 100% of principal, restricting suitability to investors with specific risk tolerance.

Secondary Market and Liquidity Factors

Morgan Stanley & Co. may provide a secondary market but is not obligated to do so and may cease market-making at any time. Secondary market prices may reflect bid-offer spreads and credit spreads, potentially resulting in significant costs for investors selling before maturity.

The securities are not exchange-listed, limiting liquidity to direct transactions with Morgan Stanley or other market makers if available.

Regulatory and Registration Information

Issued under Registration Statement Numbers 333-293641 and 333-293641-01, with the pricing supplement dated July 16, 2026, these notes are part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program. The product, index, tax supplements, and prospectus provide additional governing terms, all incorporated by reference.

The SEC and state regulators have not approved or disapproved the securities or verified disclosure completeness, consistent with structured notes regulatory frameworks emphasizing disclosure over pre-approval.

Use of Proceeds and Hedging Strategy

Net proceeds of $1,039,059 will be used for issuing, selling, structuring, and hedging activities. Typically, issuers purchase derivatives on the underlying index to hedge exposure to capped upside payments and potential principal losses.

Issuance and hedging costs are embedded in the $13.60 per security discount from the offering price. Specific hedging details are outlined in the referenced product supplement but are not disclosed in the pricing supplement.