Morgan Stanley Finance LLC Introduces Callable Contingent Income Securities Tied to European and Technology Sector ETFs

Product Structure and Contingent Coupon Features

The callable contingent income securities are structured to provide investors with the potential for above-market interest payments in exchange for principal-at-risk exposure. The 11.50% annual contingent coupon is payable only if, on each observation date, the closing level of all three underliers remains at or above their respective coupon barrier levels. If any underlier closes below its coupon barrier on an observation date, no coupon will be paid for that period.

This contingent payment mechanism results in a binary coupon outcome, requiring all three underliers to meet performance thresholds simultaneously. Consequently, investors face the risk of receiving no coupons throughout the 2 years and 8 months term if even one underlier underperforms, despite strong performance by the others.

Multi-Underlier Exposure and Worst-Performer Risk

The securities are linked to the EURO STOXX 50 Index, the iShares Expanded Tech-Software Sector ETF (IGV), and the State Street Real Estate Select Sector SPDR ETF (XLRE). Investors are exposed to the worst-performing of these three, meaning a significant decline in any single underlier will determine the final payout at maturity, regardless of the others’ performance. This structure concentrates risk rather than providing diversification benefits.

The filing highlights that the securities’ value depends on the worst-performing underlier, so any decline below coupon barrier and downside threshold levels by one underlier adversely impacts returns, even if the other underliers perform well. This exposes investors to combined geographic and sector-specific risks across European equities, technology software, and real estate sectors.

Principal Repayment and Downside Threshold Risk

At maturity, if not redeemed early, investors will receive the $1,000 principal per security only if all underliers’ final levels are at or above their respective downside thresholds. Should any underlier fall below its downside threshold, investors incur losses proportional to the worst-performing underlier’s decline, losing 1% of principal for every 1% drop. This could result in a maturity payment significantly below principal or even zero.

Investors must be prepared to accept the risk of losing their entire initial investment based on any single underlier’s performance. Principal repayment depends on all three underliers remaining above thresholds, with any breach causing proportional principal erosion.

Early Redemption and Risk Neutral Valuation Model

The securities include a call feature allowing Morgan Stanley to redeem early starting November 4, 2026. Early redemption, which can only occur in full, is determined by a risk neutral valuation model assessing economic rationality for Morgan Stanley compared to non-redemption. Monthly redemption opportunities extend through January 4, 2029.

The valuation model incorporates current market levels, volatilities, correlations, and Morgan Stanley’s credit spreads as of pricing. Early redemption is not automatic based on underlier performance but occurs when economically advantageous for Morgan Stanley. Upon early redemption, investors receive principal plus any due contingent coupon, with no further payments thereafter.

Issuer Credit Risk and Guarantee Details

These unsecured securities are obligations of Morgan Stanley Finance LLC and fully guaranteed by Morgan Stanley. Payments depend on Morgan Stanley’s creditworthiness; a default could result in partial or total loss. The securities are not secured by any underlying assets.

They are not bank deposits, are uninsured by the FDIC or any government agency, and are not bank obligations. Investors rely solely on Morgan Stanley’s credit quality, which can affect secondary market value if deteriorated.

Distribution and Fee-Based Advisory Account Restriction

Sales are limited to investors purchasing through fee-based advisory accounts. Morgan Stanley & Co., an affiliate and wholly owned subsidiary, will sell securities acquired from Morgan Stanley Finance LLC to unaffiliated dealers for resale at $1,000 per security. No sales commissions will be paid, focusing distribution on advisory clients.

Commission details, issuer proceeds, and dealer purchase prices were not disclosed in the preliminary pricing supplement. This targeted distribution aligns with the complexity and risk profile, requiring investor understanding of contingent features and downside risks.

Pricing and Valuation Summary

Each security has a stated principal of $1,000 and was priced at $1,000 per security. The estimated value on the July 30, 2026 pricing date was approximately $980.70, reflecting a roughly $19.30 discount per security due to Morgan Stanley’s embedded call option and the risk premium for the contingent coupon and principal-at-risk structure.

The aggregate offering size was not disclosed preliminarily. The strike and pricing dates were July 30, 2026, with an original issue date of August 4, 2026. The final observation date for downside threshold determination is January 30, 2029, subject to postponements for non-trading or market disruption events.

Investment Suitability and Risk Factors

These securities suit investors seeking potentially above-market interest in exchange for significant principal risk. Investors do not participate in underlier appreciation and receive coupons only if conditions are met or principal back if thresholds remain intact. The structure rewards stability but penalizes significant declines.

The filing stresses that investors must accept the risk of total principal loss due to any single underlier’s performance. Multiple underliers do not provide diversification; losses in any underlier reduce returns. The 11.50% contingent coupon compensates for these embedded risks.

Observation Dates and Coupon Payment Schedule

Observation dates for coupon eligibility are detailed in the product supplement and may be postponed for non-trading days or market disruptions. Coupons are paid on specified payment dates if all underliers meet coupon barrier levels on observation dates. The final observation date is January 30, 2029, with maturity on February 2, 2029.

Investors must monitor three indices and ETFs on each observation date to determine coupon payments. Specific observation and payment dates are outlined in supplementary documents but not listed in this preliminary pricing supplement.

Registration and Filing Information

The preliminary pricing supplement was filed under Rule 424(b)(2) of the Securities Act of 1933 on July 20, 2026. The securities are issued under Registration Statements Nos. 333-293641 and 333-293641-01 as part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program, enabling ongoing issuance of structured products.

Additional details are available in the accompanying product supplement, index supplement, tax supplement, and prospectus dated April 8, 2026. Investors should review these documents to fully understand terms, underlier definitions, tax considerations, and risks. The SEC has neither approved nor disapproved the securities or verified the completeness of disclosure, consistent with standard securities offering procedures.