Morgan Stanley Issues Auto-Callable Securities Linked to Broadcom, Micron, and Pfizer with Maturity in 2029

Structure and Auto-Call Feature Explained

The newly issued securities by Morgan Stanley Finance LLC represent a complex structured investment tailored for investors accepting principal risk in exchange for potentially enhanced returns. These market-linked auto-callable obligations are fully and unconditionally guaranteed by Morgan Stanley. Unless called early, the securities mature on August 3, 2029.

The auto-call mechanism is a key feature: starting August 5, 2027, if on any calculation day the closing prices of Broadcom Inc. (AVGO), Micron Technology Inc. (MU), and Pfizer Inc. (PFE) each meet or exceed 70% of their starting prices, the securities will be automatically called. Investors then receive the principal plus a call premium that escalates with each calculation day.

Call Premium Schedule and Potential Early Returns

The call premiums increase on a simple, non-compounding basis, beginning at a minimum of 32.50% on the first calculation day, rising to at least 35.208% on the second, and reaching 46.042% by the seventh calculation day. This translates to call payments starting at $1,325.00 per $1,000 security, increasing to $1,460.42 by the seventh day.

However, investors do not benefit from any stock appreciation beyond the call premiums. Even if the underlying stocks significantly exceed their call prices, returns are capped at the applicable call premium, limiting upside potential in exchange for the possibility of enhanced early returns.

Conditional Absolute Return and Maturity Payment Details

If the securities are not called early, a contingent absolute return applies within a specific range. Should any underlying stock’s ending price fall below the call price but all remain at or above 50% of their starting prices, investors receive $1,000 plus a positive return equal to the absolute value of the percentage decline of the lowest-performing stock, capped at 50% per $1,000 security.

This feature allows for potential gains even amid moderate declines, provided no stock drops below half its initial price, offering downside mitigation within defined limits.

Principal Risk and Exposure to Losses

The filing clearly warns that if any underlying stock’s ending price falls below 50% of its starting price, investors face full exposure to the decline of the lowest-performing stock on a one-to-one basis. In such cases, maturity payments could fall below 50% of the principal or even reach zero, resulting in significant or total loss.

The basket structure means losses depend on the worst-performing stock, so a steep drop in any single stock can cause substantial losses despite positive performance in the others.

Pricing, Commissions, and Secondary Market Valuation

Offered at $1,000 per security, Morgan Stanley receives net proceeds of $974.25 after a $25.75 agent commission paid to Wells Fargo Securities, LLC. Dealers, including Wells Fargo Advisors, may earn up to $20.00 selling concessions plus a $0.75 distribution fee.

The estimated secondary market value is approximately $936.20 per security, reflecting embedded costs and risks. This valuation is based on Morgan Stanley’s proprietary pricing models considering market inputs, volatility, interest rates, and credit spreads.

Credit Risk and Guarantee Details

All payments depend on Morgan Stanley’s creditworthiness. While Morgan Stanley Finance LLC issues the securities, Morgan Stanley provides a full, unconditional guarantee. However, the securities are unsecured obligations without any claim on the underlying stocks.

Investors have no security interest or direct access to the stocks, meaning the investment is a contractual obligation backed solely by Morgan Stanley’s credit.

Target Investor Profile and Investment Purpose

These securities suit investors willing to forgo current income and stock appreciation participation for the chance to receive enhanced call or maturity payments if the underlying stocks meet specified price thresholds. They do not pay interest or dividends and offer returns only via early call or maturity payments.

This structure differs from direct equity investments or traditional equity-linked notes, focusing on defined return parameters rather than unlimited upside.

Tax and Legal Documentation

The offering is registered under Registration Statement Nos. 333-293641 and 333-293641-01, filed pursuant to Rule 424(b)(2). Investors should review the product supplement for principal at risk securities, tax supplement dated April 8, 2026, and prospectus, all accessible via provided hyperlinks, to understand tax implications, technical details, and risks.

Distribution, Marketing, and Regulatory Disclosures

Morgan Stanley may pay up to $3.00 per security to selected dealers for marketing and distribution services. The SEC and state regulators have not approved or disapproved the securities or confirmed the completeness of related documents.

The securities are not bank deposits, are uninsured by the FDIC or any government agency, and are not bank obligations or guarantees.

Complexity, Risk Factors, and Investor Considerations

The securities involve complex features and risks beyond ordinary debt instruments, including auto-callable triggers, contingent returns, basket risk tied to the lowest performer, and credit exposure to Morgan Stanley. Investors should carefully consider these factors and their risk tolerance before investing.

The structure caps upside potential while exposing investors to significant downside if any underlying stock declines sharply, requiring sophisticated analysis and alignment with specific investment goals.