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Morgan Stanley Finance LLC announced the pricing and terms for $394,000 aggregate principal amount of Contingent Income Auto-Callable Securities maturing June 28, 2028, as filed on July 27, 2026. These notes are tied to the iShares Expanded Tech-Software Sector ETF, the Russell 2000 Index, and the State Street SPDR S&P Regional Banking ETF, featuring significant principal-at-risk characteristics. Investors targeting high coupon yields should be aware of the risk of substantial losses if any underlying asset declines beyond designated thresholds.
Key Highlights
- NYSE Symbol: MS-PQ
- Morgan Stanley Finance LLC priced $394,000 in auto-callable structured notes on July 23, 2026
- Notes offer a contingent annual coupon of 13.32%, payable only if all three underlying assets remain above coupon barrier levels
- Fully and unconditionally guaranteed by Morgan Stanley parent company; maturity set for June 28, 2028
- Potential loss of up to 100% of principal if the worst-performing underlying asset falls below its downside threshold
Details on Structured Note Features and Principal Risk
The filing describes a principal-at-risk structured product intended for investors accepting significant capital loss risk in exchange for potentially higher coupon payments. Each security has a stated principal amount and issue price of $1,000, totaling $394,000 aggregate principal. Pricing occurred on July 23, 2026, with an original issue date of July 28, 2026, and maturity on June 28, 2028. The estimated value at pricing was $967.80 per security, reflecting a discount to par.
Principal repayment at maturity is not guaranteed. If the final level of any underlying asset is below its downside threshold, investors lose 1% for every 1% decline in the worst-performing asset during the term. The filing explicitly states that "payment at maturity could be significantly less than the stated principal amount and could be zero," exposing investors to total loss based on the worst-performing asset.
Contingent Coupon Structure and Observation Dates
The notes provide a contingent coupon at an annual rate of 13.32%, paid only if the closing level of each underlying asset is at or above its coupon barrier on each observation date. If any underlier closes below its coupon barrier on an observation date, no coupon is paid for that interest period. This all-or-nothing coupon design means investors receive either the full 13.32% annual coupon or none.
Coupon barrier levels are set at 70% of each asset’s initial level: $60.97 for the IGV Fund, 2,058.114 for the RTY Index, and $52.6 for the KRE Fund. The final observation date is June 23, 2028, subject to postponements for non-trading days or market disruptions. Coupon payment dates align with observation dates as detailed in the product supplement, with the final coupon payment, if applicable, on maturity.
Automatic Early Redemption and Call Features
The securities will be automatically redeemed if, on any redemption determination date, all three underliers close at or above their call threshold levels, which are set at 100% of initial levels: $87.10 for IGV, 2,940.163 for RTY, and $75.15 for KRE. Early redemption pays investors the stated principal plus the contingent coupon for that interest period.
The first redemption determination date is January 25, 2027, with subsequent dates on the 23rd or 24th/25th of each month through May 23, 2028, subject to postponements. Early redemption payments occur approximately three business days after determination dates. Once redeemed early, no further payments will be made.
Three Underlying Assets and Worst-Performer Risk
The notes are linked to the iShares Expanded Tech-Software Sector ETF (IGV), Russell 2000 Index (RTY), and State Street SPDR S&P Regional Banking ETF (KRE). Returns depend on the worst-performing underlier, concentrating risk rather than providing diversification.
The filing warns that linking to multiple underliers does not offer diversification benefits; a decline below coupon barriers or downside thresholds in any asset negatively impacts returns, even if others perform well. The strike and pricing date for all three was July 23, 2026. Investors do not participate in any asset appreciation beyond early redemption or final coupon plus principal, while downside losses are unlimited.
Downside Threshold and Maturity Payment Details
If the notes are not redeemed early, maturity payments depend on whether each underlier’s final level is at or above its downside threshold. While specific downside thresholds are not detailed in the excerpt, the filing states investors lose 1% for every 1% decline in the worst-performing asset below its threshold, implying full downside participation.
If all underliers meet or exceed their downside thresholds, investors receive the stated principal plus any contingent coupon for the final observation date. The filing clarifies investors do not benefit from any appreciation beyond this amount, resulting in limited upside but unlimited downside exposure below thresholds.
Issuance, Pricing, and Distribution Information
Morgan Stanley Finance LLC is the issuer, with full guarantee from Morgan Stanley. The public price is $1,000 per security, with agent commissions and fees totaling $22 per security, resulting in net proceeds of $978 per security. Total principal issued is $394,000, with $8,668 in agent fees and $385,332 net proceeds.
Morgan Stanley & Co. LLC acts as agent for the offering. Selected dealers and advisors receive a fixed $22 sales commission per security. The notes are part of MSFL’s Series A Global Medium-Term Notes program, unsecured obligations backed by Morgan Stanley’s guarantee. Investors have no security interest in the underlying assets.
Credit Risk and Suitability Considerations
All payments depend on the creditworthiness of Morgan Stanley Finance LLC and Morgan Stanley as guarantor. The notes are unsecured debt, ranking alongside other unsecured creditors in insolvency. Investors face the risk of losing some or all principal if the issuer defaults.
The filing states these securities suit investors seeking potentially above-market interest in exchange for significant principal loss risk and the possibility of no coupon payments. Investors must be willing to risk total loss based on any underlier’s performance. The 13.32% contingent coupon compensates for these risks but is never guaranteed.
FDIC Insurance and Regulatory Status
The securities are not deposits, savings accounts, or insured by the FDIC or any government agency, nor are they bank obligations. Despite Morgan Stanley’s banking operations, these notes lack FDIC protection.
The SEC and state regulators have neither approved nor disapproved the securities or verified the completeness of the pricing supplement. Any contrary representation is a criminal offense. Investors should review the pricing supplement alongside the product, index, tax supplements, and prospectus dated April 8, 2026, for full terms and risks.
Market Risks and Absence of Dividend or Interest Participation
The underlying assets expose investors to technology sector, small-cap equity, and regional banking risks. The worst-performer feature means declines in any sector reduce returns regardless of others’ performance.
The notes do not provide dividends or interest from the underlying ETFs or indices. Returns depend solely on price performance relative to coupon barriers and call thresholds, plus contingent coupons if earned. No coupons are paid if any underlier closes below its coupon barrier on observation dates, and principal appreciation beyond stated amounts is not available.
