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Morgan Stanley Finance LLC has introduced Contingent Income Memory Auto-Callable Securities maturing on August 7, 2029, fully guaranteed by Morgan Stanley, tied to the performance of Space Exploration Technologies Corp. Class A common stock. Filed on July 28, 2026, this structured product offers investors a 25.00% annual contingent coupon but involves significant principal risk, including the possibility of losing the entire initial investment if the underlying stock declines sharply. Priced at $1,000 per security, the estimated value at issuance was approximately $951.30, and the notes include automatic early redemption features.
Key Points
- NYSE Ticker: MS-PQ
- Morgan Stanley Finance LLC issued Contingent Income Memory Auto-Callable Securities with $1,000 stated principal, maturing August 7, 2029
- Offers 25.00% annual contingent coupon, payable if Space Exploration Technologies Corp. stock closes at or above 55% of initial level on observation dates
- First early redemption determination on October 30, 2026; automatic redemption if underlying stock reaches 100% of initial level (call threshold)
- Principal at risk: investors may lose entire principal if final stock level falls below downside threshold, with losses calculated at 1% per 1% decline
Structure and Payment Details of the Notes
The securities are unconditionally guaranteed by Morgan Stanley for obligations issued by Morgan Stanley Finance LLC. Investors purchasing at $1,000 per note accept principal-at-risk exposure combined with contingent income features. The estimated value at pricing was about $951.30 per note, reflecting embedded derivative costs and issuer credit spread totaling approximately $48.70 per note.
The notes incorporate a memory feature for coupon payments, allowing unpaid contingent coupons to accumulate and be paid on subsequent coupon dates if market conditions improve. The coupon barrier is set at 55% of the initial Space Exploration Technologies Corp. stock level, meaning no coupon is paid if the stock closes below this threshold on an observation date. Unpaid coupons are paid at the next coupon date when the stock closes at or above the barrier, without additional interest on prior unpaid amounts.
Contingent Coupon Payment Terms and Observation Dates
Investors receive a 25.00% annual contingent coupon on coupon payment dates only if the underlying stock closes at or above the 55% barrier on the related observation date. This exposes investors to the risk of no coupon payments during prolonged periods of weak stock performance relative to the barrier. Specific coupon payment dates are detailed in the offering’s "Observation Dates and Coupon Payment Dates" section.
If a coupon payment date falls on a non-business day, payment occurs on the next business day without adjustment. Importantly, if the stock remains below the coupon barrier through the final observation date of July 31, 2029, investors will receive no coupons throughout the entire investment term, despite holding the notes to maturity.
Automatic Early Redemption and Call Thresholds
The first early redemption determination date is October 30, 2026. If on any redemption determination date the stock closes at or above the 100% call threshold (initial stock level), the notes will be automatically redeemed on the corresponding early redemption date. Redemption payments include the stated principal plus the contingent coupon for the interest period and any previously unpaid coupons.
Subsequent redemption determination dates occur quarterly through April 30, 2029, with early redemption dates ranging from November 4, 2026, to May 3, 2029. Automatic redemption ends the investment, with no further payments thereafter.
Maturity Scenarios and Principal Loss Exposure
If not redeemed early, and the final stock level on July 31, 2029, is at or above the downside threshold, investors receive full principal plus any payable contingent coupons. However, if the final stock level falls below the downside threshold, investors incur losses equal to 1% for every 1% decline in the stock price, potentially resulting in a total loss of principal.
The notes do not provide participation in any stock appreciation beyond the capped coupon payments and principal recovery if thresholds are met. The filing warns investors must be prepared to lose their entire initial investment due to the significant downside risk.
Credit Risk and Guarantee Structure
Payments depend on the creditworthiness of Morgan Stanley Finance LLC and Morgan Stanley as guarantor. In case of default by Morgan Stanley, investors could lose all or part of their investment. The notes are unsecured obligations without collateral or direct claim on the underlying stock.
The guarantee is full and unconditional but subject to Morgan Stanley’s financial health. These obligations rank equally with other unsecured debt of Morgan Stanley and are subordinate to any secured creditors in insolvency.
Pricing, Distribution, and Commissions
Notes are sold at $1,000 each, with selected dealers and advisors receiving a $20 sales commission per note from Morgan Stanley & Co. LLC, the offering agent. Net proceeds to Morgan Stanley Finance LLC are $980 per note. The estimated value of $951.30 reflects embedded option costs and credit spread.
Morgan Stanley & Co. LLC acts as both agent and subsidiary of Morgan Stanley, presenting potential conflicts of interest. The offering is registered under SEC registration numbers 333-293641 and 333-293641-01 pursuant to Rule 424(b)(2). Distribution involves multiple dealers beyond Morgan Stanley & Co. LLC.
Risk Factors and Principal-at-Risk Features
The filing highlights that these notes carry risks beyond typical debt securities, including no guaranteed principal repayment and contingent coupon payments dependent on stock performance. Investors risk losing substantial principal and may receive no coupons during the term.
Designed for investors seeking above-market yields, the 25.00% annual contingent coupon compensates for elevated risk. The notes are not bank deposits, are uninsured by FDIC or other agencies, and lack traditional deposit protections.
Underlying Asset and Pricing Details
The underlying asset is Space Exploration Technologies Corp. Class A common stock. The strike and pricing date is July 31, 2026, establishing reference levels. The issue date is August 7, 2026, with a final observation date of July 31, 2029, subject to postponements for market disruptions, creating a three-year horizon.
The filing does not disclose the exact initial stock price, only percentage thresholds (100% initial level, 55% barrier). Investors must consult supplemental documents to determine precise dollar thresholds for call, coupon barrier, and downside levels. Early redemption, coupon payments, and maturity payouts depend on these percentage-based thresholds.
Regulatory Status and Investor Guidance
The SEC and state regulators have neither approved nor disapproved these securities or determined the completeness of offering documents. Any contrary claims constitute criminal offenses. This preliminary pricing supplement filed under Rule 424(b)(2) is subject to finalization and is not a final offering document.
Investors should review this supplement alongside the product supplement, tax supplement, and prospectus dated April 8, 2026, accessible via hyperlinks in the filing. Additional terms and disclosures appear in "Additional Terms of the Securities" and "Additional Information About the Securities" sections. This layered documentation reflects the complexity of the structured notes and the importance of thorough review before investing.
