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Morgan Stanley Finance LLC has priced Dual Directional Buffered PLUS securities, principal-at-risk notes maturing on August 3, 2028, as detailed in a preliminary pricing supplement filed on July 23, 2026. These structured investments, fully guaranteed by Morgan Stanley, track the State Street SPDR S&P 500 ETF and the EURO STOXX 50 Index. Investors interested in dual-market exposure with buffered downside protection and leveraged upside potential may consider this offering, though it carries substantial principal risk.
Key Highlights
- NYSE ticker: MS-PQ
- Dual Directional Buffered PLUS securities priced with $1,000 stated principal and maturity on August 3, 2028
- Pricing and strike dates set for July 31, 2026; estimated pricing date value around $980.80 per security, within $25 of that estimate
- Features a leverage factor of at least 171%, a 10% downside buffer, and 100% absolute return participation for select performance scenarios
- Returns depend on the worst-performing of the two underlying indices; investors should review final pricing supplement terms carefully
Investment Structure and Dual Underlying Indices Exposure
The Dual Directional Buffered PLUS securities from Morgan Stanley Finance LLC offer structured exposure to two market benchmarks: the State Street SPDR S&P 500 ETF (SPY Fund) and the EURO STOXX 50 Index. This product provides combined U.S. and European equity market participation within a single instrument, with all payments tied to the worst-performing underlying index. Consequently, declines in either market will determine the security's maturity payoff.
This dual-underlier design creates a distinct risk profile that does not provide traditional diversification benefits. The investment concentrates risk on the poorest performing index, meaning that gains in one index cannot offset losses in the other if it falls below the buffer threshold. The structure is intended for investors willing to accept principal risk in exchange for potential leveraged upside and buffered downside protection within defined parameters.
Return Scenarios and Maturity Payment Mechanics
The securities use a tiered payment system based on the performance of both underliers as of the observation date, July 31, 2028. If both underliers close above their initial levels, investors receive the $1,000 principal plus leveraged upside calculated with a leverage factor of at least 171%, applied to the worst-performing underlier's percentage gain.
If either underlier finishes at or below its initial level but remains above the 90% buffer level, investors receive their principal plus a positive return equal to the absolute percentage decline of the worst-performing underlier multiplied by 100%, capped at a 10% positive return. If either underlier falls below the 10% buffer, investors incur losses of 1% per 1% decline beyond the buffer, with a minimum maturity payment of 10% of principal. This scenario exposes investors to significant principal loss.
Downside Buffer and Principal Protection Details
Each underlier features a 10% buffer, set at 90% of its initial level on the July 31, 2026 strike date. This buffer cushions modest declines, allowing investors to retain full principal plus modest positive returns if both underliers stay above this threshold, even if below their initial levels. This buffer distinguishes the Dual Directional Buffered PLUS from standard principal-at-risk notes lacking downside protection.
However, protection is limited to declines within the buffer. Breaching the buffer triggers accelerated losses on a one-to-one basis, with a floor payment of 10% of principal, capping maximum loss at 90%. Investors must accept the risk of substantial principal loss depending on either underlier's performance, making this product suitable only for risk-tolerant investors.
Leverage and Upside Participation Features
The leverage factor of at least 171% amplifies returns when both underliers appreciate, applied to the worst-performing underlier's gain. The exact leverage factor will be finalized on the July 31, 2026 pricing date and disclosed in the final supplement. This leverage enables potentially outsized gains beyond the underlying indices’ unleveraged performance.
This upside leverage applies only if both underliers close above their initial levels, rewarding investors with bullish views on both U.S. and European equities. However, this enhanced upside is balanced by downside exposure beyond the buffer, illustrating the trade-off between potential gains and principal risk.
Credit Risk and Morgan Stanley Guarantee
These securities are unsecured obligations of Morgan Stanley Finance LLC, fully and unconditionally guaranteed by Morgan Stanley. Payment depends on Morgan Stanley's creditworthiness; default could result in partial or total loss regardless of index performance. The securities are not secured by any underlying assets.
The Morgan Stanley guarantee commits the issuer to fulfill payment obligations but does not eliminate credit risk. These securities are not bank deposits, savings accounts, nor insured by the FDIC or any government agency. Investors should assess Morgan Stanley’s financial strength as it directly impacts the security’s value.
Pricing, Issuance, and Distribution Details
Issued at $1,000 per security, the estimated intrinsic value on July 31, 2026 pricing date is approximately $980.80, reflecting issuance, structuring, distribution, and hedging costs borne by investors. The difference represents embedded fees and expenses.
Sales are restricted to fee-based advisory accounts. Morgan Stanley & Co., an affiliate and wholly owned subsidiary, acts as agent. Morgan Stanley plans to sell securities to an unaffiliated dealer who will distribute them to fee-based advisory clients at the $1,000 public price. Morgan Stanley & Co. will not earn sales commissions on these securities, though other fees are disclosed in the pricing supplement.
Observation Dates, Maturity, and Trading Information
Final index levels will be observed on July 31, 2028, subject to adjustments for non-trading days or market disruptions. Maturity payment occurs August 3, 2028. The original issue date is August 5, 2026. Definitions for "closing level" and "adjustment factor" are detailed in the product supplement.
The securities’ CUSIP is 61781GZ61 and ISIN US61781GZ617. They will not be listed on any exchange and are not publicly traded, which may limit liquidity. Final terms will be disclosed in the definitive pricing supplement.
Regulatory Status and Documentation
Classified as principal-at-risk securities, these notes are part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program. They are registered under SEC registration numbers 333-293641 and 333-293641-01, with the preliminary pricing supplement filed under Rule 424(b)(2). The foundational documentation includes product, index, tax supplements, and prospectus dated April 8, 2026.
The SEC and state regulators have not approved or disapproved these securities or confirmed the accuracy of the pricing supplement. Investors should review all related documents thoroughly before investing. Final terms, including initial and buffer levels and leverage factor, will be finalized on the pricing date.
Risk Factors and Investor Suitability
These securities carry risks beyond traditional debt instruments. Investors must be willing to risk principal for leveraged upside, absolute return participation, and buffer protection, which apply only within limited performance ranges. Returns depend solely on the worst-performing underlier, negating diversification benefits.
Suitable for sophisticated investors with specific views on U.S. and European equities, these securities require understanding of leverage and buffer mechanics and acceptance of potential substantial losses. The product is intended for risk-aware investors in fee-based advisory relationships prepared to accept significant principal risk based on either underlier’s performance.
