Morgan Stanley Issues $5M Buffered Auto-Callable Securities Linked to KLA Corporation Stock with 38.76% Contingent Coupon

Details of the KLA-Linked Structured Securities

Morgan Stanley Finance LLC announced the issuance of $5 million in Contingent Income Memory Buffered Auto-Callable Securities, fully and unconditionally guaranteed by Morgan Stanley. Each security has a principal amount of $1,000, priced at par on the July 22, 2026 issue date. The underlying asset is KLA Corporation common stock, a leading semiconductor equipment manufacturer, with a strike date of July 16, 2026. The final observation date is July 29, 2027, and maturity occurs on August 3, 2027.

J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. serve as placement agents, while Morgan Stanley & Co. LLC acts as principal agent. Placement agents receive $10 per $1,000 principal, totaling $50,000 in fees, leaving Morgan Stanley Finance LLC with net proceeds of $4,950,000 after fees. The securities’ estimated value at pricing was $983.40 each.

Contingent Coupon Structure and Payment Conditions

The securities offer a contingent coupon of 38.76% annually, significantly exceeding typical fixed-income yields. This coupon is payable only if KLA stock closes at or above the coupon barrier level of $142.591 (65% of the initial stock price) on observation dates. Coupons not paid due to the stock closing below this barrier are eligible for payment on future coupon dates if the stock subsequently meets or exceeds the barrier. However, no interest accrues on unpaid coupons, and if the stock remains below the barrier through maturity, those coupons will not be paid.

Automatic Early Redemption Terms

Automatic early redemption occurs if KLA stock closes at or above $263.24 (120% of initial level) on any of eleven redemption determination dates starting August 31, 2026, through June 29, 2027. Upon early redemption, investors receive principal plus any earned contingent coupons and previously unpaid coupons. No redemption will occur before August 31, 2026, regardless of stock performance.

Downside Protection and Principal Risk

The securities include a 65% buffer level at $142.591. If the final observation on July 29, 2027, is at or above this buffer, investors recover their principal plus applicable coupons. Below this buffer, losses accelerate at 1.5385% for every 1% decline beyond the buffer, potentially resulting in a total loss of principal. Investors must be prepared to risk their entire initial investment.

Observation Dates and Coupon Schedule

Observation and redemption determination dates align with coupon payment dates, subject to postponement for non-trading days or market disruptions. The final coupon payment is made on maturity, August 3, 2027. Eleven redemption determination dates occur monthly from August 31, 2026, to June 29, 2027, with early redemption payments approximately four business days later.

Credit Risk and Unsecured Obligation

These securities are unsecured obligations of Morgan Stanley Finance LLC, guaranteed by Morgan Stanley, but not backed by collateral. Investors bear full credit risk of Morgan Stanley’s financial condition. They have no claim on the underlying KLA stock or other assets. The securities are not FDIC insured and are not bank obligations despite JPMorgan Chase Bank, N.A.’s role as placement agent.

Investor Suitability and Risk Profile

Designed for investors willing to risk principal and accept the possibility of no coupon payments in exchange for the buffer and high coupon potential. Investors do not benefit from stock appreciation beyond the early redemption threshold, capping upside while exposing them to significant downside risk, differentiating these securities from direct stock ownership or traditional bonds.

Pricing, Fees, and Economic Terms

Offered at $1,000 per security, totaling $5 million for 5,000 securities. Placement agents earned $50,000 in commissions ($10 per $1,000 principal). Morgan Stanley Finance LLC netted $4,950,000 post fees. The pricing date estimated value was $983.40 per security, reflecting the contingent coupon, principal risk, and Morgan Stanley’s credit risk. Fees were waived for fiduciary account sales.

Tax Considerations and Documentation

The pricing supplement references related documents: a Product Supplement for Principal at Risk Securities, a Tax Supplement, and a Prospectus all dated April 8, 2026. Investors should review these for detailed tax implications, as contingent coupons and gains or losses upon redemption or maturity involve complex tax treatment. These documents are accessible via hyperlinks.

Regulatory Disclosures and Investor Protections

The Securities and Exchange Commission and state regulators have neither approved nor disapproved these securities, nor verified the completeness or accuracy of the pricing supplement or related documents. The securities are not deposits, savings accounts, or insured by any government agency. Despite JPMorgan Chase Bank, N.A.’s involvement, these are unsecured obligations of Morgan Stanley Finance LLC, guaranteed by Morgan Stanley, with no bank insurance or protections.