Morgan Stanley Finance LLC Launches Enhanced Buffered Jump Securities Linked to Bloom Energy Stock Performance

Structured Product Design and Principal Details

These securities are unsecured obligations backed by an unconditional guarantee from Morgan Stanley, issued under MSFL’s Series A Global Medium-Term Notes program with a $1,000 stated principal per security. They pay no interest and do not guarantee principal repayment at maturity, placing them in the principal-at-risk category. Investors purchasing at $1,000 per security incur embedded issuance, selling, structuring, and hedging costs, reflected in the estimated pricing value of about $979.70 per security.

The debt component relies on Morgan Stanley’s creditworthiness, with payments contingent on the issuer’s financial capacity. As unsecured obligations, investors have no security interest in the underlying Bloom Energy stock and bear full credit risk exposure to Morgan Stanley. The structure combines a debt-like foundation with a performance-based component tied to Bloom Energy’s Class A stock closing prices on specified dates during the one-year term.

Bloom Energy Underlying Asset and Performance Calculation

The securities’ performance is linked to Bloom Energy Corporation Class A common stock. The initial level was set at $218.22, the closing price on the strike date of July 22, 2026. The underlier percent change is calculated by comparing the final level on the observation date (August 4, 2027) to the initial level, providing a percentage-based performance metric for the holding period.

Bloom Energy, an advanced energy sector company, forms the basis for these notes, with its stock price volatility directly impacting investor returns. The pricing supplement focuses on structural and payment mechanics and does not disclose details about Bloom Energy’s business operations, financial condition, or market position.

Buffer and Downside Protection Mechanism

The securities feature a 50% buffer level at $109.11, half the initial stock price, offering investors protection against losses before they affect payments. If the final level is at or above $109.11, investors receive their principal plus the $650.80 upside payment, the maximum payoff under the terms. This appeals to investors seeking upside participation with defined downside risk limits.

If the final level falls below the buffer, a downside factor of 2 applies, meaning investors lose 2% of principal for every 1% decline beyond the 50% buffer. For instance, a 60% decline in Bloom Energy stock results in a 20% principal loss. Payments could be substantially less than principal or even zero if declines are severe.

Upside Payment and Return Cap

The upside payment is fixed at $650.80 per security, or 65.08% of the $1,000 principal. This capped return limits maximum profit regardless of Bloom Energy’s stock appreciation over the one-year term. If the final level meets or exceeds the buffer, investors receive $1,650.80 total per security. This structure trades unlimited upside for a fixed profit ceiling combined with downside buffering.

The upside payment applies once the buffer is reached, allowing investors to capture gains up to the cap. This design suits investors expecting moderate appreciation without extreme volatility, preferring certainty in maximum returns while accepting principal risk if performance deteriorates.

Pricing, Fees, and Estimated Valuation

The issue price is $1,000 per security, with agent commissions and fees totaling $10 per security, yielding net proceeds of $990 per security to Morgan Stanley Finance LLC. J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. act as placement agents, waiving fees for certain fiduciary accounts and receiving no more than $10 per $1,000 principal from other sales. The total principal offered was not disclosed.

The estimated value at pricing was approximately $979.70 per security, reflecting embedded structuring, hedging, and distribution costs borne by investors through the discount from issue price. Morgan Stanley used proprietary pricing models incorporating Bloom Energy stock volatility, interest rates, and credit spreads. Specific component weightings were not disclosed.

Secondary Market and Trading Considerations

Morgan Stanley & Co. LLC, an affiliate and wholly owned subsidiary, serves as agent and may make a secondary market in these securities but is not obligated to do so and may stop market-making at any time. Secondary market prices may differ from estimated values due to credit spreads, bid-offer spreads, and market conditions. Specific secondary market pricing details were not provided.

Because issuance costs are not fully deducted at issuance, Morgan Stanley expects secondary market values may exceed estimated pricing values during amortization absent market changes. Investors may see higher values reflected in brokerage accounts. This framework offers some pricing transparency while maintaining Morgan Stanley’s discretion over liquidity.

Credit Risk and Guarantee Details

Payments depend on Morgan Stanley’s credit risk; if Morgan Stanley defaults, investors could lose all or part of their investment. The securities are fully and unconditionally guaranteed by Morgan Stanley but remain unsecured obligations with no collateral or security interest in underlying assets.

Investors face combined risks: underlier performance risk from Bloom Energy stock and issuer credit risk from Morgan Stanley’s ability to pay. These combined exposures require careful evaluation against investment goals and risk tolerance.

Important Dates and Observation Process

The strike date was July 22, 2026, establishing an initial level of $218.22. Pricing occurred on July 23, 2026, with an original issue date of July 28, 2026. The observation date is August 4, 2027, subject to postponement for market disruptions, determining the final level for payment calculation. Maturity is August 9, 2027, roughly one year after issuance.

This timeline defines the observation window to assess buffer breaches and payment formulas. Morgan Stanley may postpone the observation date due to market disruptions. The securities carry CUSIP 61781GX89 and ISIN US61781GX893 for standard identification and trading.

Target Investors and Risk Disclosure

Morgan Stanley identifies these securities as appropriate for investors seeking returns linked to Bloom Energy’s performance who accept principal risk and forgo current income and returns beyond the $650.80 cap. Investors must understand the buffer and upside payment apply to specific performance ranges and accept the possibility of total loss if Bloom Energy stock falls significantly below the buffer.

The filing stresses these securities carry risks beyond ordinary debt instruments and are not deposits, savings, FDIC-insured, or bank obligations beyond Morgan Stanley’s guarantee. This highlights their complexity and embedded risks compared to traditional fixed-income or bank products.

Economic Terms and Internal Funding Rate Insights

Morgan Stanley disclosed that economic terms, including the upside payment and buffer, are based on an internal funding rate likely lower than secondary market credit spreads. This internal rate benefits Morgan Stanley, implying that if it were higher or investor costs lower, terms could be more favorable. The specific internal rate and spread differential were not revealed.

This indicates the securities’ economic parameters reflect Morgan Stanley’s cost of capital and valuation models rather than purely external market pricing. The $20.30 gap between issue price and estimated value partly compensates for this internal funding advantage.