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Morgan Stanley Finance LLC has introduced Buffered Jump Securities with an Auto-Callable Feature, a five-year structured investment maturing on August 7, 2031, linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index. Issued at $1,000 per share and fully guaranteed by Morgan Stanley, these securities provide downside protection with a 15% buffer while offering potential early redemption payments if the underlying index hits designated thresholds. These principal-at-risk securities are designed for investors willing to accept potential capital loss in exchange for specified returns and buffer safeguards.
Key Points
- NYSE ticker: MS-PQ
- Morgan Stanley Finance LLC issued five-year Buffered Jump Securities with Auto-Callable Feature linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index
- Strike date: August 3, 2026; original issue date: August 6, 2026; maturity date: August 7, 2031; principal amount: $1,000 per security
- Automatic early redemption starts August 4, 2027, with call threshold at 90% and buffer level at 85% of initial index level
- Maturity payments include a fixed $1,705 if final index level exceeds call threshold, principal repayment if final level is between buffer and call threshold, and principal loss exposure below buffer level with a 15% minimum payment at maturity
Product Structure and Maturity Payment Details
The securities utilize a three-tier maturity payment system based on the S&P U.S. Equity Momentum 40% VT 4% Decrement Index closing level on August 4, 2031. If the final index level meets or exceeds 90% of the initial level, investors receive a fixed payment of $1,705 per security, equating to a 70.5% total return over five years. This caps upside returns, limiting gains beyond the call threshold.
If the final index level falls below 90% but remains at or above 85%, investors receive their $1,000 principal with no gain or loss. Should the final level drop below 85%, investors face losses calculated by multiplying $1,000 by the performance factor (final level divided by initial level) plus the 15% buffer. Payments may be significantly less than principal but will not fall below $150 per security, providing protection against losses up to 15%.
Automatic Early Redemption and Call Threshold Features
Automatic early redemption begins on August 4, 2027, with monthly determination dates thereafter. If the index closing level equals or surpasses 90% of the initial level on any determination date before maturity, the securities redeem automatically, and investors receive the corresponding early redemption payment. The early redemption yields approximately 14.10% per annum, with payments increasing incrementally throughout the schedule.
The first early redemption payment on August 4, 2027, is $1,141 per security, with subsequent payments rising monthly through at least December 4, 2028. Upon early redemption, investors no longer hold the securities and forgo any further index appreciation, effectively capping returns at the specified redemption amounts.
Underlying Index Composition and Performance Tracking
The securities track the S&P U.S. Equity Momentum 40% VT 4% Decrement Index, developed by S&P Dow Jones Indices LLC in collaboration with Morgan Stanley and launched on March 14, 2022. The index employs a momentum-based equity selection methodology with specific weightings and decrement factors. Detailed index composition, calculation methods, and historical data are available in the index supplement accompanying the filing.
The initial index level, established on the strike date August 3, 2026, serves as the reference for call thresholds, buffer levels, and performance calculations. All early redemption and maturity payment determinations compare subsequent index closings to this reference level. The index supplement provides further transparency regarding rebalancing and usage restrictions.
Pricing and Estimated Value Information
The securities are issued at a par value of $1,000 each. The pricing supplement estimates the value on the pricing date at approximately $904.30 per security, with a range within $54.30 of this estimate. The $95.70 difference reflects embedded features such as the call option, buffer protection, and automatic redemption. Agent commissions and final pricing details will be finalized in the prospectus supplement upon formal pricing.
Morgan Stanley & Co. LLC, acting as agent and affiliate of Morgan Stanley Finance LLC, will distribute the securities through selected dealers who will receive fixed sales commissions. Specific commission amounts, issuer proceeds, and final pricing remain to be determined. This estimated value highlights the cost of embedded derivatives and guarantees within the security.
Credit Risk and Guarantor Obligations
The securities are unsecured obligations of Morgan Stanley Finance LLC and are fully and unconditionally guaranteed by Morgan Stanley. If Morgan Stanley Finance LLC cannot fulfill payment obligations, investors may seek performance from Morgan Stanley. Payments are subject to Morgan Stanley's credit risk, and investors could lose some or all of their investment in case of default.
These notes are unsecured, with no claim on underlying assets or collateral. They are not deposits, savings accounts, or insured by the FDIC or any government agency, nor guaranteed by any bank. Investor recovery depends solely on the creditworthiness of Morgan Stanley and its finance subsidiary.
Principal at Risk and Investor Suitability
The filing classifies these securities as principal-at-risk investments unsuitable for those seeking capital preservation or current income. They do not pay regular interest and are intended for investors willing to accept potential capital loss in exchange for buffer protection and possible early redemption or maturity payments exceeding principal. Investors will not benefit from index appreciation beyond the call threshold, capping upside potential.
The buffer protects against declines up to 15%, but losses occur beyond that point. The securities carry risks beyond typical debt instruments, requiring investors to have the financial capacity to endure principal erosion if the index falls below the 85% buffer level.
Issue Date and Determination Schedule
The strike date of August 3, 2026, sets the reference index level. The original issue date follows on August 6, 2026. The first determination date for early redemption is August 4, 2027, with monthly dates thereafter through at least December 2028 and continuing until maturity on August 7, 2031. Early redemption payments increase by approximately $11.75 monthly during this period.
The final determination date is August 4, 2031, subject to postponements for non-trading days or market disruptions. The five-year term includes 60 monthly determination dates, allowing multiple opportunities for early redemption if the index meets the 90% call threshold. Securities cannot be redeemed before the first determination date, ensuring investors hold them for at least one year.
Registration and Regulatory Disclosures
The securities are issued under Registration Statement Nos. 333-293641 and 333-293641-01 filed with the SEC under the Securities Act of 1933. The preliminary pricing supplement complies with Rule 424(b)(2) for registered securities. These notes form part of Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program, under which structured and conventional debt securities are periodically issued.
Cross-referenced documents include the principal-at-risk securities product supplement, index supplement, tax supplement, and prospectus all dated April 8, 2026. These provide detailed terms, tax implications, index methodology, and use of proceeds. The SEC and state regulators have not approved or disapproved the securities or verified the completeness of disclosure, reflecting the preliminary status of this pricing supplement.
Investor Participation Limits and Yield Characteristics
Investors will not participate in index appreciation beyond the 90% call threshold, capping returns regardless of index gains. If the index reaches or exceeds 100% of the strike level at maturity, investors receive the fixed $1,705 payment rather than proportional growth. If the index declines to 85%, principal is fully returned without gain or loss. This asymmetric payoff reflects the cost of buffer protection embedded in pricing.
The early redemption feature offers an approximate annualized return of 14.10%, locking in yield if the index triggers redemption from August 4, 2027, onward. Early redemption compounds this yield over the remaining term, presenting an attractive alternative to lower-yield fixed income. However, if the index remains between 85% and 90% through maturity, investors receive no additional return, posing an opportunity cost compared to conventional debt.
