Contingent Income Buffered Auto-Callable Securities due May 1, 2029, with 1-Year Initial Non-Call Period
Based on the Performance of the S&P® U.S. Equity Momentum 40% VT 4% Decrement Index
Fully and Unconditionally Guaranteed by Morgan Stanley
Principal at Risk Securities
The securities offered are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this document. The securities do not provide for the regular payment of interest and provide a minimum payment at maturity of only 15% of the stated principal amount. Instead, the securities will pay a contingent monthly coupon, but only with respect to each observation date on which the index closing value of the underlying index is greater than or equal to 65% of the initial index value, which we refer to as the coupon barrier level. In addition, starting one year after the original issue date, if the index closing value of the underlying index is greater than or equal to the initial index value on any monthly redemption determination date, the securities will be automatically redeemed for an amount per security equal to the stated principal amount and the contingent monthly coupon. No further payments will be made on the securities once they have been redeemed. At maturity, if the securities have not previously been redeemed and the final index value of the underlying index has increased, remained unchanged or decreased by an amount less than or equal to the buffer amount of 15% from the initial index value, investors will receive the stated principal amount and the related contingent monthly coupon. If, however, the final index value of the underlying index has decreased by more than the buffer amount of 15% from the initial index value, investors will lose 1% of principal for every 1% decline in the final index value of the underlying index from the initial index value beyond the buffer amount of 15%. Under these circumstances, the payment at maturity will be less than the stated principal amount of the securities. Accordingly, investors in the securities must be willing to accept the risk of losing up to 85% of their initial investment and also the risk of not receiving any contingent monthly coupons throughout the 5-year term of the securities. These long-dated securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving few or no contingent monthly coupons over the 5-year term of the securities, with no possibility of being called out of the securities until after the initial 1-year non-call period. Investors will not participate in any appreciation of the underlying index. The securities are issued as part of MSFL’s Series A Global Medium-Term Notes program.
The S&P® U.S. Equity Momentum 40% VT 4% Decrement Index (the “Index” or the “underlying index”) is a rules-based, long-only index that was developed by S&P® Dow Jones Indices LLC (“S&P®”), in coordination with Morgan Stanley, and was established on March 14, 2022. The underlying index employs a rules-based quantitative strategy that consists of a risk-adjusted, momentum-based, or trend following, approach to construct a portfolio composed of equity futures contracts. In addition, the strategy applies an overall volatility-targeting feature upon the resulting portfolio and is subject to a 4.0% per annum daily decrement.
The goal of the underlying index is to provide rules-based exposure to unfunded, rolling positions in equity futures contracts, with a maximum exposure to the futures contracts of 400%. The index components are selected from a universe of three equity futures contracts – the E-Mini Nasdaq-100 Futures (“NQ”), which reference the Nasdaq-100 Index®, the E-Mini S&P 500 Futures (“ES”), which reference the S&P 500® Index, and the E-Mini Russell 2000 Futures (“QR”), which reference the Russell 2000® Index. We refer to the E-Mini Nasdaq-100 Futures, the E-Mini S&P 500 Futures and the E-Mini Russell 2000 Futures as the Index Components.
There are seven discrete steps in calculating the underlying index level: (1) a risk-adjusted momentum signal is calculated for each Index Component; (2) the index composition (the “Base Index”) is calculated using the risk-adjusted momentum signals; (3) the realized volatility level of the Base Index (the “Base Volatility”) is calculated; (4) theoretical leverage is calculated based on the Base Volatility and the underlying index’s targeted volatility; (5) the theoretical leverage is compared to the actual leverage; (6) if necessary, the actual leverage is adjusted; and (7) a 4.0% per annum daily decrement is applied.
For more information see “Annex A—S&P® U.S. Equity Momentum 40% VT 4% Decrement Index” below and “Risk Factors—Risks Relating to the Underlying Index” below.
All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
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SUMMARY TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying index:
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S&P® U.S. Equity Momentum 40% VT 4% Decrement Index
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Aggregate principal amount:
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$
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Stated principal amount:
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$1,000 per security
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Issue price:
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$1,000 per security
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Pricing date:
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April 26, 2024
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Original issue date:
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April 30, 2024 (3 business days after the pricing date)
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Maturity date:
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May 1, 2029
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Contingent monthly coupon:
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●If, on any observation date, the index closing value or the final index value, as applicable, is greater than or equal to the coupon barrier level, we will pay a contingent monthly coupon at an annual rate of at least 11.75% (corresponding to approximately $9.792 per month per security, to be determined on the pricing date) on the related coupon payment date.
●If, on any observation date, the index closing value or the final index value, as applicable, is less than the coupon barrier level, no contingent monthly coupon will be paid with respect to that observation date. It is possible that the underlying index will remain below the coupon barrier level for extended periods of time or even throughout the entire 5-year term of the securities so that you will receive few or no contingent monthly coupons.
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Payment at maturity:
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If the securities have not been automatically redeemed prior to maturity, the payment at maturity will be determined as follows:
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●If the final index value of the underlying index is greater than or equal to 85% of the initial index value, meaning that the final index value of the underlying index has increased, remained unchanged or decreased by an amount less than or equal to the buffer amount of 15% from the initial index value:
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the stated principal amount and the contingent monthly coupon with respect to the final observation date.
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●If the final index value of the underlying index is less than 85% of the initial index value, meaning that the final index value of the underlying index has decreased by more than the buffer amount of 15% from the initial index value:
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$1,000 + [$1,000 × (index percent change + 15%)]
If the final index value of the underlying index is greater than or equal to the coupon barrier level, investors will receive the contingent monthly coupon with respect to the final observation date.
Under these circumstances, the payment at maturity will be less than the stated principal amount of $1,000. However, under no circumstances will the securities pay less than the minimum payment at maturity of $150 per security.
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Minimum payment at maturity:
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$150 per security (15% of the stated principal amount)
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Terms continued on the following page
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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Approximately $900.30 per security, or within $50.30 of that estimate. See “Investment Summary” beginning on page 4.
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Commissions and issue price:
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Price to public
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Agent’s commissions(1)
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Proceeds to us(2)
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Per security
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)Selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $ for each security they sell. See “Supplemental information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement.
(2)See "Use of proceeds and hedging" on page 26.
The securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 13.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed by, a bank.
You should read this document together with the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable. Please also see “Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Auto-Callable Securities dated November 16, 2023 Index Supplement dated November 16, 2023
Prospectus dated April 12, 2024
