Morgan Stanley Introduces Contingent Income Memory Auto-Callable Securities Tied to Nasdaq-100 Index Maturing in 2027

Detailed Overview of the New Securities

Morgan Stanley Finance LLC has filed a preliminary pricing supplement for its Contingent Income Memory Auto-Callable Securities, maturing August 10, 2027. This offering targets investors seeking potential above-market interest rates while accepting the risk of losing some or all of their principal. These securities are unsecured obligations of Morgan Stanley Finance LLC and are fully guaranteed by Morgan Stanley.

Unlike traditional debt instruments, these securities do not guarantee principal repayment or regular interest payments. Instead, they offer contingent coupons linked to the Nasdaq-100 Index’s performance, making them suitable for investors with a higher risk appetite.

Structure of the Contingent Coupon

The securities feature an annual contingent coupon rate of 12.12%. Coupons are payable only if the Nasdaq-100 Index closes at or above a specified coupon barrier level on observation dates. If the index closes below this threshold, no coupon is paid for that period.

Unpaid coupons can accumulate and be paid on future coupon dates if the index recovers above the coupon barrier, introducing a unique risk-reward profile where investors might receive no coupon payments if the index underperforms.

Automatic Early Redemption Feature

A key attribute of these securities is the automatic early redemption provision. If the Nasdaq-100 Index’s closing level meets or exceeds the call threshold on designated redemption determination dates, the securities will be redeemed early, including the stated principal and any applicable contingent coupons.

The initial redemption determination date is November 5, 2026, followed by February 5, 2027, and May 5, 2027. Should the index fail to meet the call threshold on these dates, the securities will remain outstanding until maturity.

Maturity Payment Conditions

If not redeemed early, the maturity payment depends on the Nasdaq-100 Index’s final level. Investors will receive the stated principal and any due contingent coupons if the final index level is at or above the downside threshold. However, if the final level falls below this threshold, investors will incur losses proportional to the index’s decline, losing 1% for every 1% drop.

This structure highlights the risk of receiving significantly less than the initial principal or potentially no return at maturity, depending on index performance.

Risks Inherent in the Securities

These securities carry risks uncommon to traditional debt, primarily the possibility of principal loss if the Nasdaq-100 Index underperforms during the term. They are unsecured obligations, so investors have no claim on Morgan Stanley’s assets.

Additionally, all payments depend on Morgan Stanley’s creditworthiness. A default could result in partial or total loss of investment. The contingent coupon payments add further risk, as they may not be paid if the index performs poorly.

Investor Suitability and Considerations

This offering is aimed at investors willing to accept higher risk in exchange for potential returns exceeding conventional market rates. Due to the product’s complexity, investors must thoroughly review the product supplement and prospectus.

Prospective investors should assess their investment goals, risk tolerance, and the possibility of substantial losses before investing. Consulting a financial advisor is recommended to ensure alignment with individual investment strategies.

Market Context and Monitoring

The Nasdaq-100 Index’s performance is critical for investors in these securities. Comprising 100 leading non-financial Nasdaq-listed companies, the index is influenced by economic factors, interest rates, and market sentiment.

Investors should closely track the index’s performance, especially near observation and redemption dates, to evaluate risks and potential rewards effectively.

Summary of the Offering

Morgan Stanley’s launch of Contingent Income Memory Auto-Callable Securities offers an alternative investment option with the potential for enhanced returns. However, the risks—including principal loss and contingent coupon payments—require careful investor consideration.

Given the securities’ link to Nasdaq-100 Index performance, investors should remain vigilant about market conditions and be prepared for volatility. Reviewing the detailed terms in the product supplement is essential for a full understanding of this investment opportunity.