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Morgan Stanley Finance LLC has launched $291,000 in Contingent Income Auto-Callable Notes maturing on July 21, 2031, as per a pricing update dated July 16, 2026. These structured notes are tied to the common stock performance of Costco Wholesale Corporation, JPMorgan Chase & Co., and Microsoft Corporation, with returns based on the worst-performing stock among them. The notes offer a contingent annual coupon of 7.60% and include automatic early redemption features if all three stocks stay above designated threshold levels.
Key Points
- NYSE ticker: MS-PQ
- Morgan Stanley Finance LLC issued $291,000 in Contingent Income Auto-Callable Notes maturing July 21, 2031
- Priced at $1,000 per note on July 16, 2026, with an estimated value of $968.70 per note at pricing
- 7.60% annual contingent coupon payable only if all three underlying stocks close at or above coupon barrier levels on observation dates
- Automatic early redemption triggered if all three stocks remain at or above call threshold levels on any redemption determination date starting July 16, 2027
Structure and Underlying Assets of the Notes
These notes, issued by Morgan Stanley Finance LLC and fully guaranteed by Morgan Stanley, track the performance of three major U.S. equities: Costco Wholesale Corporation, JPMorgan Chase & Co., and Microsoft Corporation. The return depends on the worst-performing stock among the three, negating any diversification benefit. This "worst-of" feature means that a decline in any one stock adversely impacts the notes’ overall returns, even if the other two stocks perform well.
Issued as unsecured obligations under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, each note has a principal amount of $1,000, totaling $291,000 in issuance. Both the pricing and strike dates were July 16, 2026, with the original issue date on July 21, 2026. Instead of traditional interest payments, these notes provide contingent income based on specific barrier levels and observation dates.
Contingent Coupon Details and Payment Criteria
The notes pay a contingent coupon at an annual rate of 7.60% on coupon payment dates, but only if every underlying stock closes at or above its coupon barrier level on the related observation date. These coupon barriers are set at 75% of each stock's initial price: $709.178 for Costco, $257.363 for JPMorgan Chase, and $300.825 for Microsoft. If any stock closes below its coupon barrier on an observation date, no coupon is paid for that period, regardless of the other stocks’ performance.
This all-or-nothing coupon mechanism results in binary outcomes where investors either receive the full 7.60% coupon or none at all for each period. Investors assume significant downside risk in exchange for the potential above-market coupon, contingent on all three stocks maintaining at least 75% of their initial levels throughout the five-year term.
Early Redemption Features and Call Thresholds
Automatic early redemption provisions begin on the first redemption determination date of July 16, 2027, and continue monthly through June 17, 2031. If on any redemption date all three stocks close at or above their call threshold levels, the notes will be redeemed early at the stated principal plus the contingent coupon for that period. The call thresholds equal 100% of each stock's initial price: $945.57 for Costco, $343.15 for JPMorgan Chase, and $401.10 for Microsoft.
Early redemption limits investors’ upside since they receive no further payments beyond the redemption date, even if the stocks continue to appreciate. The requirement that all three stocks simultaneously meet or exceed their call thresholds means early redemption is contingent on collective strong performance.
Maturity Terms and Final Observation
If the notes are not redeemed early, they mature on July 21, 2031. Investors will then receive the principal amount plus the contingent coupon if the worst-performing stock closes at or above its coupon barrier on the final observation date of July 16, 2031, subject to adjustments for non-trading days or market disruptions. If the barrier is not met, investors receive principal only without a final coupon.
The five-year term from July 21, 2026, to July 21, 2031, represents a medium-term investment during which investors forgo equity appreciation. Returns are limited to cumulative contingent coupons plus principal, with no participation in stock price gains beyond early redemption.
Pricing, Issue Price, and Fees
The notes were priced at $1,000 each, with Morgan Stanley & Co. LLC acting as agent. The estimated value at pricing on July 16, 2026, was $968.70 per note, reflecting an initial discount. Agent commissions and fees amounted to $2.50 per note, resulting in net proceeds of $997.50 per note to Morgan Stanley Finance LLC. Total gross proceeds were $291,000, with agent commissions totaling $727.50 and net proceeds of $290,272.50.
Sales were limited to fee-based advisory accounts. Morgan Stanley & Co. planned to sell the notes to an unaffiliated dealer at $997.50 per note for resale at the $1,000 public price. Selected dealers and advisors could earn structuring fees up to $6.25 per note from the agent or affiliates. Additionally, a third-party data analytics provider was paid $0.50 per note for analytics services requested by the dealer involved.
Worst-Performing Stock Linkage and Risk Concentration
A key feature is the notes’ dependence on the worst-performing stock among Costco, JPMorgan Chase, and Microsoft. The disclosure clarifies that linking to multiple stocks does not provide diversification; instead, a decline in any one stock negatively impacts returns. This worst-of structure concentrates risk rather than spreading it across multiple equities.
Investors do not benefit from any stock appreciation beyond early redemption. The design caps upside while exposing investors fully to downside risk if any stock falls below barrier levels, creating an asymmetric risk-return profile.
Credit Risk and Guarantee Information
Payments on the notes are subject to Morgan Stanley’s credit risk, which unconditionally guarantees Morgan Stanley Finance LLC's obligations. If Morgan Stanley defaults, investors could lose part or all of their investment. The notes are unsecured and do not grant any claim on underlying assets.
These notes are not bank deposits, are uninsured by the FDIC or any government agency, and are not guaranteed by any bank. Consequently, there is no government protection if Morgan Stanley or its affiliate faces financial difficulties, making credit risk a significant factor separate from market risk.
Intended Investors and Risk Profile
The notes target investors focused on principal repayment who seek a potentially above-market coupon in exchange for the risk of receiving no coupons during the term. The 7.60% contingent coupon offers enhanced yield compared to traditional debt, but only if all three stocks meet strict barrier conditions on every observation date.
Risks include the contingent coupon payments, worst-of stock linkage, absence of equity upside participation, requirement for all stocks to meet thresholds simultaneously, and full credit exposure to Morgan Stanley. Prospective investors should assess whether the potential yield adequately compensates for these risks.
Redemption and Observation Schedule
Redemption determination dates occur monthly from July 16, 2027, through June 17, 2031, allowing frequent early redemption opportunities if all stocks meet call thresholds. These dates may be postponed for non-trading days or market disruptions.
This monthly schedule introduces uncertainty regarding the investment’s duration, as notes may be called early if conditions are met. Investors must actively monitor all three stocks throughout the five-year term due to monthly coupon observations and redemption assessments.
