The information in this pricing supplement
is not complete and may be changed. We may not deliver these securities until a final pricing supplement is delivered. This pricing supplement
and the accompanying prospectus and prospectus supplement do not constitute an offer to sell these securities and we are not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Preliminary
Pricing Supplement dated April 14, 2021
PROSPECTUS Dated November 16, 2020
|
Pricing Supplement No. 1,318 to
|
PROSPECTUS SUPPLEMENT Dated November 16, 2020
|
Registration Statement Nos. 333-250103; 333-250103-01
|
|
Dated April , 2021
|
|
Rule 424(b)(2)
|
$
Morgan Stanley Finance LLC
GLOBAL MEDIUM-TERM NOTES, SERIES A
Senior Notes
Autocallable Securities due May
1, 2024
Based on the Performance of Copper
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Autocallable Securities due May
1, 2024 Based on the Performance
of Copper, which we refer to as the securities, are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are
fully and unconditionally guaranteed by Morgan Stanley. Unlike ordinary debt securities, the securities do not pay interest and do not
guarantee the return of any principal at maturity. If the commodity price of copper, which we refer to as the underlying commodity, on
either of the two review dates is at or above the initial commodity price, the securities will be automatically called for a fixed cash
payment per security, which we refer to as the call price, that will vary depending on the review date. At maturity, if the securities
have not previously been called and the final commodity price is at or above the initial commodity price, investors will receive a payment
at maturity of at least $1,300 per security (to be determined on the pricing date). If the securities have not previously been called
and the final commodity price is less than the initial commodity price but greater than or equal to the downside threshold level of 90%
of the initial commodity price, investors will receive a payment at maturity of $1,000 per security. However, if the securities have
not previously been called and the final commodity price is less than the downside threshold level, investors will be exposed to the
decline in the underlying commodity on a 1-to-1 basis, and will receive a payment at maturity that is less than 90% of the stated principal
amount of the securities and could be zero. Accordingly, you must be willing to accept the risk of losing your entire initial investment
in the securities. The securities are for investors who are willing to risk their principal and forgo current income and participation
in the appreciation of the underlying commodity in exchange for the possibility of receiving a call price or payment at maturity that
is greater than the stated principal amount if the commodity price on a review date or the final commodity price, as applicable, is at
or above the initial commodity price, and, if the securities have not been called, in exchange for limited protection against loss at
maturity that applies only if the final commodity price is greater than or equal to the downside threshold level. Investors will not
participate in any appreciation of the underlying commodity. The securities are notes issued as part of Morgan Stanley Finance LLC’s
Series A Global Medium-Term Notes program.
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.
|
•
|
The stated principal amount and original issue price of each security is $1,000.
|
|
•
|
We will not pay interest on the securities.
|
|
•
|
If, on either of the two review dates, the commodity price is at or above the initial commodity
price, the securities will be automatically called on the third business day following such review date for the applicable call price,
which will vary depending on the applicable review date. The call prices will be determined on the pricing date, but will not be less
than the call prices stated below for each review date:
|
|
º
|
First Review Date, April 20, 2022: at least $1,100 (corresponding to at least 110.00% of the stated
principal amount); or
|
|
º
|
Second Review Date, April 20, 2023: at least $1,200 (corresponding to at least 120.00% of the stated
principal amount).
|
|
•
|
At maturity, if the securities have not previously been called, you will receive for each security
that you hold an amount of cash equal to:
|
|
º
|
if the final commodity price is at or above the initial commodity price: at least $1,300 (corresponding
to at least 130.00% of the stated principal amount) (to be determined on the pricing date),
|
|
º
|
if the final commodity price is less than the initial commodity price but is greater than
or equal to the downside threshold level, which means it has not declined by more than 10% from the initial commodity
price: the $1,000 stated principal amount of the securities, or
|
|
º
|
if the final commodity price is less than downside threshold level, which means it has declined
by more than 10% from the initial commodity price: $1,000 × commodity performance factor.
Under these circumstances, the payment at maturity will be less than 90% of the stated principal amount
of the securities and could be zero. There is no minimum payment at maturity on the securities. Accordingly, you could lose your entire
initial investment in the securities.
|
|
•
|
The initial commodity price is $ , which is the commodity price on April 20, 2021, which is the day
we price the securities for initial sale to the public, which we refer to as the pricing date.
|
|
•
|
The downside threshold level is $ , which is 90% of the initial commodity price.
|
|
•
|
The final commodity price will equal the commodity price on the final determination date.
|
|
•
|
The final determination date is April 28, 2024.
|
|
•
|
Each review date and the final determination date are each subject to postponement for non-trading
days and certain market disruption events.
|
|
•
|
The commodity performance factor is equal to: final commodity price / initial commodity price.
|
|
•
|
Investing in the securities is not equivalent to investing directly in copper or in futures contracts
or forward contracts on copper.
|
|
•
|
The securities will not be listed on any securities exchange.
|
|
•
|
The estimated value of the securities on the pricing date is approximately $963.50, or within $33.50
of that estimate. See “Summary of Pricing Supplement” beginning on PS-2.
|
|
•
|
The CUSIP number for the securities is 61771VUF5. The ISIN for the securities is US61771VUF56.
|
You should read the more detailed description of the securities
in this pricing supplement. In particular, you should review and understand the descriptions in “Summary of Pricing Supplement”
and “Description of Securities.”
The securities are riskier than ordinary debt securities. Securities
linked to the performance of a single commodity are subject to the volatility and other risks associated with that commodity. See “Risk
Factors” beginning on PS-10.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this pricing supplement is truthful or complete. Any representation
to the contrary is a criminal offense.
PRICE $1,000 PER SECURITY
|
Price
to public
|
Agent’s
commissions(1)
|
Proceeds
to us(2)
|
Per security
|
$1,000
|
$22.50
|
$977.50
|
Total
|
$
|
$
|
$
|
_______________
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, MS & Co.,
a fixed sales commission of $22.50 for each security they sell. See “Description of Securities—Supplemental Information Concerning
Plan of Distribution; Conflicts of Interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)”
in the accompanying prospectus supplement.
|
|
(2)
|
See “Description of Securities—Use of Proceeds and Hedging” beginning on PS-24.
|
The agent for this offering, Morgan Stanley & Co. LLC, is
an affiliate of MSFL and a wholly-owned subsidiary of Morgan Stanley. See “Description of Securities—Supplemental Information
Concerning Plan of Distribution; Conflicts of Interest” in this pricing supplement.
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.
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.
SUMMARY OF PRICING SUPPLEMENT
The following summary describes the Autocallable
Securities due May
1, 2024 Based on the Performance of Copper, which we refer to as the securities, we are offering to you in general
terms only. You should read the summary together with the more detailed information that is contained in the rest of this pricing supplement
and in the accompanying prospectus and prospectus supplement. You should carefully consider, among other things, the matters set forth
in “Risk Factors.”
The securities offered are medium-term debt
securities of MSFL and are fully and unconditionally guaranteed by Morgan Stanley. The return on the securities is linked to the performance
of copper, which we refer to as the underlying commodity. The securities are for investors who are willing to risk their principal and
forgo current income and participation in the appreciation of the underlying commodity in exchange for the possibility of receiving a
call price or payment at maturity that is greater than the stated principal amount if the commodity price on a review date or the final
commodity price, as applicable, is at or above the initial commodity price, and, if the securities have not been called, in exchange
for limited protection against loss at maturity that applies only if the final commodity price is greater than or equal to the downside
threshold level. The securities do not guarantee the return of any principal at maturity and all payments on the securities are subject
to our credit risk.
The securities are riskier than ordinary
debt securities. Securities linked to the performance of a single commodity are subject to the volatility and other risks associated with
that commodity. See “Risk Factors” beginning on PS-10.
Each security costs $1,000
|
We are offering the Autocallable Securities due May
1, 2024 Based on the Performance of Copper, which we refer to as the securities. The stated principal amount and issue price of each security is $1,000.
|
|
The original issue price includes costs associated with issuing, selling,
structuring and hedging the securities, which are borne by you, and, consequently, the estimated value of the securities on the pricing
date will be less than $1,000. We estimate that the value of each security on the pricing date will be approximately $963.50, or within
$33.50 of that estimate. Our estimate of the value of the securities as determined on the pricing date will be set forth in the final
pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying commodity. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
commodity, instruments based on the underlying commodity, volatility and other factors including current and expected interest rates,
as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional
fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including the
commodity price that will result in the securities being called on the call dates and the call prices, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring
and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities
would be more favorable to you.
What is the relationship between the estimated value on the pricing
date and the secondary market price of the securities?
The price at which Morgan Stanley & Co. LLC, which we refer to
as MS & Co., purchases the securities in the secondary market, absent changes in market conditions,
|
|
including those related to the underlying commodity, may vary from,
and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other
factors.
MS & Co. may, but is not obligated to, make a market in the securities
and, if it once chooses to make a market, may cease doing so at any time.
|
The securities do not guarantee repayment of any principal at maturity; no interest
|
Unlike ordinary debt securities, the securities do not pay interest and do not guarantee the repayment of any of the principal at maturity. If the securities have not been called prior to maturity and the final commodity price has declined below the downside threshold level of 90% of the initial commodity price, you will be fully exposed to the negative performance of the underlying commodity, and you will lose 1% of your principal amount for every 1% decline in the final commodity price from the initial commodity price. For example, if the final commodity price declines by 50% from the initial commodity price, you will lose 50% of your principal. There is no minimum payment at maturity on the securities. Accordingly, you could lose your entire initial investment in the securities.
|
The securities will be automatically called if the commodity price on either of the two review dates is at or above the initial commodity price
|
If the commodity price on either of the two review dates is at or above the initial commodity price, the securities will be automatically called for the call price on the third business day following the related review date, which we refer to as a call date. The call price will be an amount of cash that will vary depending on the applicable review date (in each case, as determined on the pricing date), as follows:
|
|
• if the commodity price on
April 20, 2022, the first review date, is at or above the initial commodity price, the securities will be called for a call price of at
least $1,100 per security (corresponding to at least 110.00% of the stated principal amount), or
• if the commodity price on
April 20, 2023, the second review date, is at or above the initial commodity price, the securities will be called for a call price of
at least $1,200 per security (corresponding to at least 120.00% of the stated principal amount).
|
|
Each review date is subject to postponement for non-trading days and certain market disruption events as described under “Description of Securities—Review Dates.”
|
If the securities are not automatically called prior to maturity, the payment at maturity will vary depending on the final commodity price
|
At maturity, if the securities have not previously been called, you
will receive for each $1,000 stated principal amount of securities that you hold an amount of cash that will vary depending on the final
commodity price, and will be equal to:
• if the final commodity price
is at or above the initial commodity price: at least $1,300 (corresponding to at least 130.00% of the stated principal amount)
(to be determined on the pricing date),
• if the final commodity price
is less than the initial commodity price but is greater than or equal to the downside threshold level, which means it has not
declined by more than 10% from the initial commodity price: the $1,000 stated principal amount of the securities, or
|
|
• if the final commodity price
is less than the downside threshold level, which means it has declined by more than 10% from the initial commodity price:
$1,000 × commodity performance
factor
|
|
where,
|
commodity performance factor
|
=
|
final commodity
price
|
|
initial commodity price
|
|
initial commodity price
|
=
|
$ , which is the commodity price on April 20, 2021, which is the day we price the securities for initial sale to the public, which we refer to as the pricing date
|
downside threshold level:
|
=
|
$ , which is 90% of the initial commodity price
|
final commodity price
|
=
|
the commodity price on the final determination date
|
final determination date
|
=
|
April 28, 2024, subject to postponement for non-trading days and certain market disruption events as described under “Description of Securities—Final Determination Date”
|
commodity price
|
=
|
on any trading day, the official cash offer price per tonne of Copper Grade A on the London Metal Exchange (“LME”) for the spot market, stated in U.S. dollars, as determined by LME on such date.
|
|
If the final commodity price declines by more
than 10% from the initial commodity price, you will be fully exposed to the decline in the final commodity price from the initial commodity
price. There is no minimum payment at maturity on the securities. Accordingly, you could lose your entire initial investment in the securities.
All payments on the securities upon an automatic
early call or at maturity are subject to our credit risk.
|
|
Beginning on PS-8, we have provided examples titled “Hypothetical Payouts on the Securities upon Automatic Call or at Maturity,” which explain in more detail the possible payouts on the securities on each call date and at maturity assuming a variety of hypothetical commodity prices for each review date and hypothetical final commodity prices, as applicable. The hypothetical examples do not show every situation that can occur.
|
|
You can review the historical prices of the underlying commodity in the section of this pricing supplement called “Description of Securities—Historical Information” starting on PS-23. You cannot predict the future price of the underlying commodity based on its historical prices.
|
|
Investing in the securities is not equivalent to investing directly in copper or in futures contracts or forward contracts on copper.
|
The appreciation potential of the securities is limited to the fixed
returns specified for each call date or at maturity, as applicable, and investors will not participate in any appreciation of the underlying
commodity
|
The appreciation potential of the securities is limited to the fixed return specified for each call date or at maturity, as applicable, regardless of any greater price performance of the underlying commodity, which could be significant. In addition, the automatic early call feature may limit the term of your investment to as short as one year. If the securities are called prior to maturity, you may not be able to reinvest at comparable terms or returns.
|
Investing in the securities is not equivalent to
|
Investing in the securities is not equivalent to investing directly in copper or in futures contracts or forward contracts on copper. By purchasing the securities, you
|
investing directly in copper or in futures contracts or forward contracts on copper
|
do not purchase any entitlement to copper or futures contracts or forward contracts on
copper. Further, by purchasing the securities, you are assuming our credit risk and not that of any counter-party to
futures contracts or forward contracts on the underlying commodity.
|
Concentrated investment in copper
|
All payments on the securities are linked exclusively to the price of copper and not to a diverse basket of commodities or a broad-based commodity index. Therefore, the securities carry greater risk and may be more volatile than a security linked to the prices of multiple commodities or a broad-based commodity index.
|
Postponement of maturity date
|
If, due to a market disruption event or otherwise, the final determination date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be the second business day following the final determination date as postponed. See “Description of Securities—Maturity Date.”
|
Morgan Stanley Capital Group Inc. will be the calculation agent
|
We have appointed our affiliate, Morgan Stanley Capital Group Inc., which we refer to as MSCG, to act as calculation agent for The Bank of New York Mellon, a New York banking corporation, the trustee for our senior notes. As calculation agent, MSCG will determine the initial commodity price, the commodity price on each review date, the final commodity price, whether the commodity price on either of the two review dates is at or above the initial commodity price and therefore whether the securities will be called following such review date, whether a market disruption event has occurred, and, if the securities are not called prior to maturity, the amount of cash, if any, you will receive at maturity.
|
Morgan Stanley & Co. LLC will be the agent; conflicts of interest
|
The agent for the offering of the securities, MS & Co., a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL, will conduct this offering in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Description of Securities—Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.”
|
You may revoke your offer to purchase the securities prior to our acceptance
|
We are using this pricing supplement to solicit from you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at which we accept such offer by notifying the relevant agent. We reserve the right to change the terms of, or reject any offer to purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will notify you.
|
Where you can find more information on the securities
|
The securities are unsecured debt securities issued as part of our Series A medium-term note program. You can find a general description of our Series A medium-term note program in the accompanying prospectus supplement dated November 16, 2020 and prospectus dated November 16, 2020. We describe the basic features of this type of security in the section of the prospectus supplement called “Description of Notes—Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or Indices” and in the section of the prospectus called “Description of Debt Securities—Fixed Rate Debt Securities.”
|
|
For a detailed description of the terms of the securities, you should read the section of this pricing supplement called “Description of Securities.” You should also read about some of the risks involved in investing in the securities in the section of this pricing supplement called “Risk Factors.” The tax and accounting treatment of investments in commodity-linked securities such as the
|
|
securities may differ from that of investments in ordinary debt securities. See the section
of this pricing supplement called “Description of Securities—United States Federal Taxation.” We urge
you to consult with your investment, legal, tax, accounting and other advisers with regard to any proposed or actual investment in
the securities.
|
HOW THE SECURITIES WORK
The following diagrams illustrate the potential
outcomes for the securities depending on the commodity price on each of the review dates and the final commodity price, as applicable.
Diagram #1: Automatic Early Call (Starting
April 2022)
Diagram #2: Payment at Maturity if No Automatic
Early Call Occurs
HYPOTHETICAL PAYOUTS ON THE SECURITIES UPON
AUTOMATIC CALL OR AT MATURITY
The following examples illustrate the payout on the securities for
a range of commodity prices for each of the review dates and a range of final commodity prices, as applicable, and are being provided
for illustrative purposes only. These examples are based on the following terms:
|
•
|
Hypothetical Initial Commodity Price: $8,000
|
|
•
|
Hypothetical Downside Threshold Level: $7,200, which is 90% of the hypothetical initial commodity
price
|
|
•
|
Hypothetical Call Price:
|
|
o
|
$1,100 if the securities are automatically called immediately after the April 20, 2022 review date
|
|
o
|
$1,200 if the securities are automatically called immediately after the April 20, 2023 review date
|
|
o
|
If the final commodity price is at or above the initial commodity price: $1,300
|
|
o
|
If the final commodity price is less than the initial commodity price but is greater than or equal to the downside threshold level:
$1,000
|
|
o
|
If the final commodity price is less than the downside threshold level: $1,000 × commodity performance factor
|
|
•
|
Stated Principal Amount (per security): $1,000
|
The actual initial commodity price, downside threshold level, call
prices and payment at maturity if the final commodity price is at or above the initial commodity price will be determined on the pricing
date.
|
•
|
In Examples 1 and 2, the commodity price on one of the two review dates
is at or above the initial commodity price. Because the commodity price on one of the two review dates is at or above the initial commodity
price, the securities are automatically called following the relevant review date for the applicable call price. However, investors do
not participate in the appreciation of the underlying commodity. In each of Examples 3, 4 and 5, the commodity price on each of the review
dates is lower than the initial commodity price, and, consequently, the securities are not automatically called prior to, and remain outstanding
until, maturity.
|
Review Date
|
Example 1
|
Example 2
|
Example 3
|
Example 4
|
Example 5
|
|
Hypothetical Commodity Price
|
Payout
|
Hypothetical Commodity Price
|
Payout
|
Hypothetical Commodity Price
|
Payout
|
Hypothetical Commodity Price
|
Payout
|
Hypothetical Commodity Price
|
Payout
|
#1
|
$9,500
|
$1,100
|
$7,000
|
—
|
$4,500
|
—
|
$4,500
|
—
|
$4,500
|
—
|
#2
|
—
|
—
|
$9,000
|
$1,200
|
$6,000
|
—
|
$6,000
|
—
|
$6,000
|
—
|
Final Determination Date
|
—
|
—
|
—
|
—
|
$12,000
|
$1,300
|
$7,600
|
$1,000
|
$4,400
|
$550
|
Total Payout:
|
$1,100 immediately after the April 20, 2022 review date
|
$1,200 immediately after the April 20, 2023 review date
|
$1,300 at maturity
|
$1,000 at maturity
|
$550 at maturity
|
|
•
|
In Example 3, the final commodity price is $12,000, which is higher than the hypothetical initial
commodity price of $8,000 and represents a 50% increase in the initial commodity price. The payment at maturity equals $1,300 per security,
representing a 30% return on your investment. The return on your investment would be less than the 50% return you would receive on a comparable
investment linked to the simple return on the underlying commodity.
|
|
•
|
In Example 4, the final commodity price is $7,600, which is lower than the hypothetical initial commodity
price of $8,000 but greater than the downside threshold level. Because the final commodity price has not declined by more than 10% from
the initial commodity price, the payment at maturity equals the stated principal amount of $1,000 per security.
|
|
•
|
In Example 5, the final commodity price is $4,400, which is lower than the downside threshold level.
Because the final commodity price has declined by more than 10% from the initial commodity price, investors are exposed to that decline
on a 1-to-1 basis and will receive a payment at maturity that represents a 45% loss of their principal, calculated as follows:
|
$1,000 × commodity performance
factor = $1,000 × 55% = $550.
If the securities are not called prior to maturity and the final
commodity price of the underlying commodity is below the downside threshold level, you will be exposed to the downside performance of
the underlying commodity at maturity, and your payment at maturity will be less than $900 per security and could be zero.