Investment Summary
Principal at Risk Securities
The Enhanced Trigger Jump Securities Based on the Worst Performing of the Common Stock of Lowe’s Companies, Inc., the Common Stock of The Hershey Company and the Common Stock of The Clorox Company due July 23, 2025 (the “securities”) can be used:
■As an alternative to direct exposure to the underlying stocks that provides a fixed return of 12.30% if the final share price of each underlying stock is greater than or equal to its respective downside threshold value;
■To enhance returns and potentially outperform the worst performing of the Common Stock of Lowe’s Companies, Inc., the Common Stock of The Hershey Company and the Common Stock of The Clorox Company in a moderately bullish or moderately bearish scenario;
■To obtain limited protection against the loss of principal in the event of a decline of the underlying stocks as of the valuation date, but only if the final share price of each underlying stock is greater than or equal to its respective downside threshold value.
If the final share price of any underlying stock is less than its downside threshold value, the securities are exposed on a 1-to-1 basis to the percentage decline of the final share price of the worst performing underlying stock from its respective initial share price. Accordingly, investors may lose their entire initial investment in the securities.
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Maturity:
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Approximately 1 year
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Upside payment:
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$123 per security (12.30% of the stated principal amount), payable only if the final share price of each underlying stock is greater than or equal to its respective downside threshold value
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Downside threshold value:
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For each underlying stock, 65% of its respective initial share price
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Minimum payment at maturity:
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None. Investors may lose their entire initial investment in the securities.
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Interest:
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None
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The original issue price of each security is $1,000. This 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 is less than $1,000. We estimate that the value of each security on the pricing date is $979.30.
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 stocks. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying stocks, instruments based on the underlying stocks, 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 upside payment and the downside threshold values, 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 MS & Co. purchases the securities in the secondary market, absent changes in market conditions, including those related to the underlying stocks, 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. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying stocks, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected in your brokerage account statements.
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.