Morgan Stanley Finance LLC Launches $415 Million Auto-Callable Jump Securities Linked to S&P 500 Futures Index

Details of the Jump Securities Offering Structure

This structured investment product, issued by Morgan Stanley Finance LLC and fully guaranteed by Morgan Stanley, totals $415 million in aggregate principal. Each security carries a stated principal of $1,000. These unsecured obligations are linked to the S&P 500 Futures 40% Intraday 4% Decrement VT Index, the underlying reference. Both issue and public prices are set at $1,000 per security, while the estimated value on pricing date is $923.10, reflecting embedded issuance, sales, structuring, and hedging costs. Morgan Stanley & Co. LLC acts as the offering agent, expecting to acquire securities at $997.50 each for resale to fee-based advisory accounts without direct sales commissions.

The pricing and strike date was July 23, 2026, with the original issue date on July 28, 2026. These securities have a five-year term, with the final determination date on July 23, 2031, subject to postponement for market disruptions or non-trading days. Maturity is set for July 28, 2031. Registered under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program (Registration Nos. 333-293641 and 333-293641-01), the securities bear CUSIP 61781GN56 and ISIN US61781GN563 and will not be listed on any exchange.

Automatic Early Redemption and Payment Terms

The securities feature an automatic early redemption mechanism allowing for accelerated exit. On July 26, 2027, if the underlier closes at or above 2,928.762 (90% of the initial 3,254.18 level), the securities will be redeemed early. Investors will receive $1,300 per security on July 29, 2027, representing a 30% return within approximately one year if this condition is met. After early redemption, no further payments will be made, so investors forfeit any additional upside beyond this fixed amount.

This auto-callable design benefits from moderate market gains while protecting the issuer through the 90% threshold, which is below the initial index level. Early redemption requires the index to remain stable or appreciate. Investors should note that triggering early redemption ends participation in any further upside before maturity.

Maturity Payment Structure and Principal Risk

If not redeemed early, payments at maturity depend on the final index level. Should the final level exceed the initial 3,254.18, investors receive the $1,000 principal plus an upside payment calculated as principal multiplied by a 250% participation rate and the index's percent change. For example, a 10% index increase yields a $250 upside payment, totaling $1,250.

If the final level is between 1,627.09 (50% of initial) and the initial level, investors receive only the $1,000 principal without additional payments, establishing a protective floor at a 50% decline. If the final level falls below 1,627.09, the maturity payment equals principal multiplied by the ratio of final to initial level, exposing investors to dollar-for-dollar losses, potentially reducing payments to zero.

Valuation and Pricing Methodology

The filing clarifies the estimated value of $923.10 per security at pricing is $76.90 below the $1,000 issue price, reflecting embedded costs. Morgan Stanley's valuation combines a debt component and a performance-based element tied to the underlier, using internal models, market inputs, and assumptions on volatility, interest rates, and credit spreads.

An internal funding rate, typically lower than secondary market credit spreads, is used, favoring the issuer economically. The filing notes that lower issuance costs or higher funding rates would yield more favorable terms for investors. Secondary market purchase prices by Morgan Stanley & Co. may differ from the estimated value based on market conditions.

Distribution and Commission Structure

The agent's commission totals $2.50 per security ($1,037.50 aggregate), resulting in proceeds of $997.50 per security ($413,962.50 total) to Morgan Stanley Finance LLC. Securities are exclusively sold to fee-based advisory accounts, reflecting a restricted distribution strategy. Morgan Stanley & Co. plans to purchase all securities at $997.50 for resale to unaffiliated dealers at the same price, with final public sale at $1,000.

No direct sales commissions are paid to Morgan Stanley & Co.; compensation arises from the spread between issuer proceeds and public price. This approach targets a specific investor segment and aligns with structured product market norms emphasizing licensed advisory channels. Additional details on distribution and conflicts of interest are provided in supplemental documentation.

Credit Risk and Guarantee Details

These securities carry full credit risk of Morgan Stanley as unsecured obligations of Morgan Stanley Finance LLC, fully and unconditionally guaranteed by Morgan Stanley. All payments depend on Morgan Stanley's creditworthiness; default could lead to partial or total loss of investment. Investors have no security interest in underlying assets.

The filing highlights that these are not bank deposits or insured by the FDIC or any government agency, distinguishing them from traditional savings instruments. The unconditional guarantee offers some protection but does not eliminate credit risk, which depends on the guarantor's financial health.

Underlier Index and Reference Levels

The securities are linked to the S&P 500 Futures 40% Intraday 4% Decrement VT Index, a customized index variant. The initial level on July 23, 2026, is 3,254.18, serving as the baseline for performance calculations. The 90% call threshold is 2,928.762, and the 50% downside threshold is 1,627.09, both fixed throughout the term. Final level determination occurs on July 23, 2031, subject to postponements for market disruptions.

The filing refers to an index supplement for detailed index construction, historical performance, and volatility data. The chosen index variant reflects Morgan Stanley's selection for this offering.

Investment Suitability and Risk Considerations

The securities suit investors willing to risk principal and forego current income for potential early redemption or maturity payments exceeding principal. No regular interest is paid; returns depend on index appreciation or early redemption. The product targets investors comfortable with principal loss risk and structured equity-linked product volatility.

The filing repeatedly stresses the possibility of total principal loss, with downside protection only at maturity if the index remains above 50% of the initial level. Losses are dollar-for-dollar below this threshold. The 250% upside participation and early redemption features compensate for this principal-at-risk exposure.

Costs, Commissions, and Secondary Market Information

Beyond the $2.50 agent commission, the $76.90 per security discount from issue price reflects issuance, structuring, and hedging costs borne by investors. These include design fees, hedging expenses, and transaction costs. The difference between issue price and estimated value quantifies entry costs.

Securities will trade over-the-counter via Morgan Stanley or other dealers, not on exchanges. Secondary market prices reflect underlier value changes and Morgan Stanley credit spreads and may be lower than estimated value at pricing. Early exit may incur significant discounts depending on market conditions.

Regulatory Filings and Documentation

The offering is governed by supplemental documents including the Product Supplement for Principal at Risk Securities, Index Supplement, Tax Supplement, and Prospectus, all dated April 8, 2026, accessible via hyperlinks in the pricing supplement. The July 23, 2026, pricing supplement was filed under SEC Rule 424(b)(2) as a final pricing amendment.

The filing states the SEC and state regulators have not approved or disapproved the securities or verified disclosure completeness. Any contrary representation is a criminal offense. Investors are urged to review all disclosure materials to understand terms and risks fully.