Morgan Stanley Launches Five-Year Auto-Callable Structured Notes Tied to Dow Jones, Nasdaq-100, and S&P 500 Indices

Investment Structure and Index-Linked Return Mechanics

Morgan Stanley Finance LLC’s structured notes provide multi-index exposure to equity markets with protective features and an auto-call option. The notes track the Dow Jones Industrial Average, Nasdaq-100, and S&P 500 simultaneously, with returns based on the worst-performing index. This design allows upside participation when all indices rise but concentrates downside risk if any one index declines significantly relative to its starting point.

Performance measurement starts on the strike date, July 24, 2026, establishing baseline index levels. Final returns are calculated by comparing closing levels on July 24, 2031, to these initial levels. Using the worst-performing index to determine payments means strong gains in one or two indices do not offset losses in the weakest, increasing concentrated risk exposure.

Auto-Callable Feature and Early Redemption Terms

An automatic early redemption feature activates if, on the first determination date of July 27, 2027, all three indices close at or above 95% of their initial levels. If triggered, investors receive $1,180 per security on July 30, 2027, representing an 18% return on the $1,000 principal, with no further payments thereafter.

The 95% threshold is designed to trigger early redemption in moderately positive market conditions. Specific numerical index levels for this threshold were redacted in the public filing, with only the 95% parameter disclosed. If the early call condition is unmet, the notes continue until maturity on July 29, 2031.

Maturity Payment Calculation Based on Final Index Performance

At maturity, payments depend on the worst-performing index’s change from its initial July 24, 2026 level. If all indices have appreciated, investors receive the $1,000 principal plus upside calculated as 125% participation multiplied by the worst-performing index’s gain. For example, a 10% appreciation in the worst-performing index yields $1,125 per security.

If the worst-performing index declines but remains above the 80% buffer level (a maximum 20% drop), investors receive the full principal without upside or downside adjustments. If the index falls below 80%, losses are amplified by a 1.25 factor on declines beyond the buffer. For instance, a 25% total decline (5% beyond the buffer) results in a 6.25% loss, reducing payment to $937.50. Payments could be significantly less than principal and potentially zero in severe declines.

Risk Considerations and Potential Principal Loss

These principal-at-risk securities do not guarantee principal repayment or regular interest. Investors exchange fixed income for potential enhanced returns, accepting the risk of losing their entire $1,000 investment. The worst-performing index determines returns, concentrating downside risk despite multiple index exposure. The 1.25 downside multiplier increases losses beyond the 20% buffer, meaning severe market downturns could wipe out principal.

Credit Risk and Guarantee Details

Issued as unsecured obligations of Morgan Stanley Finance LLC, the notes are fully and unconditionally guaranteed by Morgan Stanley. Principal and payments depend entirely on Morgan Stanley’s creditworthiness. The securities lack collateral or claims on specific assets. If Morgan Stanley defaults, investors may lose some or all of their investment despite the guarantee.

All payments are subject to Morgan Stanley’s credit risk. The securities are not FDIC insured, nor are they bank deposits. Investors should assess Morgan Stanley’s financial health carefully before investing, as the issuer’s credit profile directly impacts payment reliability.

Distribution and Fee Structure for Fee-Based Advisory Accounts

These securities are offered exclusively to investors with fee-based advisory accounts, limiting access to those with ongoing advisory relationships. Morgan Stanley & Co. LLC acts as agent, distributing through a dealer network to qualifying accounts. MS & Co. purchases the entire issuance from Morgan Stanley Finance LLC and sells to unaffiliated dealers for resale at the $1,000 public price.

Dealers and financial advisors may receive structuring fees up to $6.25 per security. Additionally, a third-party data analytics provider may be paid $0.50 per security at a dealer’s request. MS & Co. disclaims warranties regarding the analytics and does not receive direct sales commissions, reflecting the structured distribution process.

Pricing Details and Estimated Initial Value

Issued at $1,000 per unit, the stated principal and issue price are equal. The preliminary pricing supplement dated July 20, 2026, redacted aggregate principal and fee amounts. The pricing date and strike date coincide on July 24, 2026, with the original issue date on July 29, 2026.

The estimated value at pricing was approximately $978.90 per security, about $21.10 below principal. This discount reflects the cost of embedded options including upside participation, buffer protection, and early redemption. Actual value may vary with market conditions and volatility on pricing day.

Tax Implications and Required Documentation

Issued under Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program, these securities are governed by detailed legal and financial documents. Investors must review the preliminary pricing supplement alongside product, index, tax supplements, and prospectus documents accessible via hyperlinks in offering materials. The tax supplement dated April 8, 2026, outlines complex federal, state, local, and foreign tax treatments that vary by investor.

Registration statement numbers 333-293641 and 333-293641-01 confirm SEC registration. Final terms, including fees and index levels, will be disclosed in a final pricing supplement. Investors should carefully evaluate all documentation and tax considerations before investing, as tax treatment may differ from traditional capital gains.

Market Context and Index Selection

The three indices represent broad U.S. equity benchmarks: the Dow Jones Industrial Average (30 large-cap stocks), Nasdaq-100 (100 large- and mid-cap stocks weighted toward technology and growth), and S&P 500 (500 large-cap stocks covering ~80% of U.S. equity market capitalization). The five-year term from July 29, 2026, to July 29, 2031, spans a full market cycle and diverse economic conditions.

The worst-performer methodology increases downside risk compared to typical diversification, as any index’s weakness dictates returns. Market factors affecting any index—sector rotation, monetary policy, earnings, valuation, or volatility—directly impact security performance. Historical volatility and correlation data for these indices over the term were not provided.

Investor Profile and Suitability

Designed for investors willing to risk full principal loss and forego current income, these securities suit those seeking potential capital appreciation with downside buffer protection over a five-year horizon. The product contrasts with traditional bonds by offering no coupons and exposing principal to market risk.

The early redemption at 95% levels offers an 18% gain opportunity, while the 20% buffer limits moderate losses. The 125% upside participation enhances returns in bull markets, offset by the 1.25 downside multiplier amplifying losses in bear markets. Prospective investors should assess risk tolerance, objectives, and portfolio fit before purchase.