July
2024
Preliminary
Pricing Supplement No. 3,125
Registration
Statement Nos. 333-275587; 333-275587-01
Dated
July 24, 2024
Filed
pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities
in U.S. Equities
|
Market
Linked Securities—Auto-Callable with Fixed Percentage Buffered Downside
Principal at
Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Fully and
Unconditionally Guaranteed by Morgan Stanley
|
|
§ |
Linked
to the common stock of PayPal Holdings, Inc. (the “underlying stock”) |
|
§ |
The
securities offered 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, do not guarantee the repayment
of principal and are subject to potential automatic call prior to the maturity date upon the terms described below. The securities
have the terms described in the accompanying product supplement for principal at risk securities and prospectus, as supplemented
or modified by this document. |
|
§ |
Automatic
Call. The securities will be automatically called if the stock closing price of the underlying stock on any of the calculation
days is greater than or equal to the starting price for a call payment equal to the face amount plus a call premium. The call
premium applicable to each calculation day will be a percentage of the face amount that increases for each calculation day based
on a simple (non-compounding) return of at least 17.55% per annum (to be determined on the pricing date). No further payments will
be made on the securities once they have been called. |
|
§ |
Maturity
Payment Amount. If the securities are not automatically called, you will receive at maturity a cash payment per security as follows: |
|
§ |
If
the ending price of the underlying stock is less than the starting price, but greater than or equal to 90% of the starting
price, which we refer to as the threshold price, you will receive a maturity payment amount of $1,000 per $1,000 security. |
|
§ |
If
the ending price of the underlying stock is less than the threshold price, investors will be exposed to the decline in the underlying
stock beyond 10%, and investors will lose some or a significant portion of their initial investment. |
|
§ |
The
maturity payment amount may be significantly less than the face amount, and you could lose up to 90% of your investment. |
|
§ |
The
securities are for investors who are willing to forgo current income and participation in the appreciation of the underlying stock
in exchange for the possibility of receiving a call payment if the underlying stock closes at or above the starting price on any
of the calculation days, including the final calculation day. |
|
§ |
Investors
will not participate in any appreciation of the underlying stock. |
|
§ |
The
securities are notes issued as part of MSFL’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 securities
included in the underlying stock. |
The current estimated value of the securities
is approximately $968.80 per security, or within $45.00 of that estimate. The estimated value of the securities is determined
using our own pricing and valuation models, market inputs and assumptions relating to the underlying stock, instruments based on the underlying
stock, 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. See
“Estimated Value of the Securities” on page 4.
The securities
have complex features and investing in the securities involves risks not associated with an investment in ordinary debt securities. See
“Risk Factors” beginning on page 10. All payments on the securities are subject to our credit risk.
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 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 for principal at risk securities and prospectus, each of which can be accessed via the hyperlinks below. When you
read the accompanying product supplement, please note that all references in such supplement 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 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.
Commissions and offering price: |
Price to public |
Agent’s commissions(1)(2) |
Proceeds to us(3) |
Per security |
$1,000 |
$25.75 |
$974.25 |
Total |
$ |
$ |
$ |
| (1) | Wells Fargo Securities, LLC, an agent for this offering, will receive a commission of up to $25.75 for each security it sells. Dealers,
including Wells Fargo Advisors (“WFA”), may receive a selling concession of up to $20.00 per security, and WFA may receive
a distribution expense fee of $0.75 for each security sold by WFA. See “Supplemental information concerning plan of distribution;
conflicts of interest.” |
| (2) | In respect of certain securities sold in this offering, we may pay a fee of up to $3.50 per security to selected securities dealers
in consideration for marketing and other services in connection with the distribution of the securities to other securities dealers. |
| (3) | See “Use of Proceeds and Hedging” in the accompanying product supplement. |
Morgan Stanley |
Wells Fargo Securities |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Issuer: |
Morgan Stanley Finance LLC |
Guarantor: |
Morgan Stanley |
Maturity date: |
August 5, 2027†, subject to postponement if the final calculation day is postponed |
Underlying stock: |
The common stock of PayPal Holdings, Inc. (the “Underlying company”) (Nasdaq symbol: PYPL) |
Automatic call: |
If, on any calculation day, beginning on August
5, 2025, the share closing price of the underlying stock is greater than or equal to the starting price, the securities will be automatically
called for the applicable call payment on the related call settlement date. The last calculation day is the final calculation day, and
any payment upon an automatic call on the final calculation day, if applicable, will be made on the maturity date.
The securities will not be automatically called
on any call settlement date if the stock closing price of the underlying stock is below the starting price on the related calculation
day.
Any positive return on the securities will
be limited to the applicable call premium, even if the stock closing price of the underlying stock on the applicable calculation day significantly
exceeds its starting price. You will not participate in any appreciation of the underlying stock.
|
Call payment: |
The call payment will be an amount in cash per face amount corresponding
to a return at a per-annum rate that will be set on the pricing date, as follows:
·
1st
calculation day: at least $1,175.50, which corresponds to a call premium of at least 17.55%
·
2nd
calculation day: at least $1,263.25, which corresponds to a call premium of at least 26.325%
·
3rd
calculation day: at least $1,351.00, which corresponds to a call premium of at least 35.10%
·
4th
calculation day: at least $1,438.75, which corresponds to a call premium of at least 43.875%
·
Final
calculation day: at least $1,526.50, which corresponds to a call premium of at least 52.65%
The actual call payment and call premium applicable to each calculation
day will be determined on the pricing date.
No further payments will be made on the securities once they have
been called. |
Calculation days: |
Semi-annually, as follows:
·
1st
calculation day: August 5, 2025†*
·
2nd
calculation day: February 5, 2026†*
·
3rd
calculation day: August 5, 2026†*
·
4th
calculation day: February 5, 2027†*
·
Final
calculation day: August 2, 2027†* |
Call settlement date: |
Three business days after the applicable calculation day.* |
Maturity payment amount: |
If the securities are not automatically called,
you will be entitled to receive on the maturity date a cash payment per security as follows:
§
if the ending price is less than the starting price but greater than or equal to the threshold price:
$1,000; or
§
if
the ending price is less than the threshold price:
Under these circumstances, you will receive less, and up to 90%
less, than the face amount of your securities at maturity.
|
Stock closing price: |
With respect to the underlying stock, stock closing price, closing price and adjustment factor have the meanings set forth under “General Terms of the Securities—Certain Terms for Securities Linked to an Underlying Stock—Certain Definitions” in the accompanying product supplement for principal at risk securities. |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Starting price: |
$ , which is the stock closing price on the pricing date. |
Ending price: |
The stock closing price on the final calculation day. |
Threshold price: |
$ , which is equal to 90% of the starting price. |
Face amount: |
$1,000 per security. References in this document to a “security” are to a security with a face amount of $1,000. |
Pricing date: |
July 31, 2024*† |
Original issue date: |
August 5, 2024*† (3 business days after the pricing date) |
CUSIP / ISIN: |
61776MU52 / US61776MU525 |
Listing: |
The securities will not be listed on any securities exchange. |
Agents: |
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells Fargo Securities, LLC (“WFS”). See “Additional Information About the Securities—Supplemental information regarding plan of distribution; conflicts of interest.” |
†To the extent we make any change to the pricing date or original
issue date, the calculation days and maturity date may also be changed in our discretion to ensure that the term of the securities remains
the same.
* Subject to postponement pursuant to “General Terms of the Securities—Consequences
of a Market Disruption Event; Postponement of a Calculation Day” in the accompanying product supplement for principal at risk securities.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Estimated Value of the Securities |
The face amount 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 will be less than $1,000 per security. We estimate that the value of each security
on the pricing date will be approximately $968.80, or within $45.00 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 stock. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
stock, instruments based on the underlying stock, 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
call payment amounts and the threshold price, 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 stock, 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 3 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 stock, 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.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
The Principal at Risk Securities Linked to the Common Stock of PayPal
Holdings, Inc. due August 5, 2027 (the “securities”) may be appropriate for investors who:
| § | Believe that the stock closing price of the underlying stock will be greater than or equal to the starting price on one of the calculation
days; |
| § | Seek the potential for a fixed return if the underlying stock has appreciated at all as of any of the calculation days in lieu of
full participation in any potential appreciation of the underlying stock; |
| § | Understand that if the stock closing price of the underlying stock is less than the starting price on each calculation day, they will
not receive any positive return on their investment in the securities, and that if the stock closing price of the underlying stock on
the final calculation day has declined by more than 10% from the starting price, they will receive less, and possibly 90% less, than the
face amount per security at maturity; |
| § | Understand that the term of the securities may be as short as approximately one year, and that they will not receive a higher call
payment with respect to a later calculation day if the securities are called on an earlier calculation day; |
| § | Are willing to forgo interest payments on the securities and dividends on the underlying stock; and |
| § | Are willing to hold the securities until maturity. |
The securities are not designed for, and may not be an appropriate
investment for, investors who:
| § | Seek a liquid investment or are unable or unwilling to hold the securities to maturity; |
| § | Require full payment of the face amount of the securities at maturity; |
| § | Believe that the stock closing price of the underlying stock will be less than the starting price on each calculation day; |
| § | Seek a security with a fixed term; |
| § | Are unwilling to accept the risk that, if the stock closing price of the underlying stock is less than the starting price on each
calculation day, they will not receive any positive return on their investment in the securities; |
| § | Are unwilling to accept the risk that the stock closing price of the underlying stock on the final calculation day may decline by
more than 10% from the starting price to the ending price, in which case they will receive less, and possibly 90% less, than the face
amount per security at maturity; |
| § | Are unwilling to accept the risk of exposure to the underlying stock; |
| § | Seek exposure to the upside performance of the underlying stock beyond the applicable call premiums; |
| § | Are unwilling to accept our credit risk; or |
| § | Prefer the lower risk of fixed income investments with comparable maturities issued by companies with comparable credit ratings. |
The considerations identified above are not
exhaustive. Whether or not the securities are an appropriate investment for you will depend on your individual circumstances, and you
should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered
the appropriateness of an investment in the securities in light of your particular circumstances. You should also review carefully the
“Risk Factors” herein and in the accompanying product supplement for risks related to an investment in the securities. For
more information about the underlying stock, please see the section titled “PayPal Holdings, Inc. Overview” below.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Determining Timing and Amount of Payment on the Securities |
The timing and amount of the payment you will receive will be determined
as follows:
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Hypothetical Payout Profile |
The hypothetical payout profile below illustrates the call payment
or maturity payment amount on the securities, as applicable, for a range of hypothetical performances of the underlying stock from its
starting price to its stock closing price on the applicable calculation day.
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324010643/image_005.jpg)
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Scenario Analysis and Examples of Hypothetical Payments on the Securities |
The following scenario analysis and examples are provided for illustrative
purposes only and are hypothetical. Whether the securities are called will be determined by reference to the stock closing
price of the underlying stock on the calculation days, and the maturity payment amount, if any, will be determined by reference to the
stock closing price of the underlying stock on the final calculation day. The actual call payment with respect to each applicable
calculation day, starting price and threshold price will be determined on the pricing date. Some numbers appearing in the examples
below have been rounded for ease of analysis. All payments on the securities are subject to our credit risk. The
below examples are based on the following terms*:
Investment term: |
3 years |
Hypothetical call payments: |
The hypothetical call payment will be an amount in cash per face amount
for each calculation day, as follows:
|
|
|
Call Payment |
|
|
· |
1st calculation day: $1,175.50 |
|
|
· |
2nd calculation day: $1,263.25 |
|
|
· |
3rd calculation day: $1,351.00 |
|
|
· |
4th calculation day: $1,438.75 |
|
|
· |
Final calculation day: $1,526.50 |
|
Hypothetical starting price: |
$100.00 |
Hypothetical threshold price: |
$90.00, which is 90% of the hypothetical starting price |
* The hypothetical starting price of $100 for the underlying
stock has been chosen for illustrative purposes only and does not represent the actual starting price of the underlying stock. The
actual starting price and threshold price will be determined on the pricing date and will be set forth under “Terms” above. For
historical data regarding the actual closing prices of the underlying stock, see the historical information set forth herein.
Automatic Call:
Example 1 — the securities are called following the second
calculation day
Date |
Stock Closing Price |
Payment (per Security) |
1st Calculation day |
$80.00 (below the starting price) |
-- |
2nd Calculation day |
$150.00 (at or above the starting price) |
$1,263.25 |
In this example, on the first calculation day, the stock closing price
of the underlying stock is below the starting price. Therefore, the securities are not called. On the second calculation day,
the stock closing price of the underlying stock is at or above the starting price. Therefore, the securities are automatically
called on the second call settlement date. Investors will receive a payment of $1,263.25 per security on the related call settlement
date. No further payments will be made on the securities once they have been called, and investors do not participate in the
appreciation in the underlying stock.
How to calculate the payment investors will receive at maturity:
In the following examples, the stock closing price of the underlying
stock is below the starting price on each of the calculation days, and, consequently, the securities are not automatically called.
Example 1 — the ending price is below the starting price but
at or above the threshold price
Date |
Stock Closing Price |
Payment (per Security) |
1st Calculation day |
$80.00 (below the starting price, securities are not called) |
-- |
2nd Calculation day |
$86.00 (below the starting price, securities are not called) |
-- |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
3rd Calculation day |
$60.00 (below the starting price, securities are not called) |
-- |
4th Calculation day |
$55.00 (below the starting price, securities are not called) |
|
Final Calculation day |
$92.00 (below the starting price but above the threshold price) |
$1,000.00 |
In this example, the stock closing price of the underlying stock is
below the starting price on each of the calculation days, and therefore the securities are not called. On the final calculation
day, the ending price is below the starting price but at or above the threshold price, and accordingly, investors receive a maturity payment
amount equal to the face amount of $1,000 per security, representing a 0% return over the 3-year term of the securities.
Example 2 — the ending price is below the threshold price
Date |
Stock Closing Price |
Payment (per Security) |
1st Calculation day |
$67.00 (below the starting price, securities are not called) |
-- |
2nd Calculation day |
$60.00 (below the starting price, securities are not called) |
-- |
3rd Calculation day |
$88.00 (below the starting price, securities are not called) |
-- |
4th Calculation day |
$80.00 (below the starting price, securities are not called) |
|
Final Calculation day |
$40.00 (below the threshold price) |
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324010643/image_006.jpg)
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324010643/image_007.jpg)
|
In this example, the stock closing price of the underlying stock is
below the starting price on each of the calculation days, and therefore the securities are not called. On the final calculation
day, the ending price is below the threshold price, and accordingly, investors are exposed to the negative performance of the underlying
stock beyond 10% and will receive a maturity payment amount that is less than the face amount of the securities. The maturity
payment amount is $500.00 per security, representing a loss of 50% on your investment over the 3-year term of the securities.
If the securities are not called prior to maturity and the ending
price is below the threshold price on the final calculation day, the securities will be exposed to any decline in the stock closing price
of the underlying stock beyond 10%. You may lose up to 90% of the face amount of your securities at maturity.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
This section describes the material risks relating to the securities. For
further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product
supplement for principal at risk securities and prospectus. We also urge you to consult your investment, legal, tax, accounting
and other advisers in connection with your investment in the securities.
Risks Relating to an Investment in the Securities
| § | The securities do not pay interest or guarantee the return of the face amount of your securities
at maturity. The terms of the securities differ from those of ordinary debt securities in that they do not pay interest
or guarantee the return of the face amount of your securities at maturity. If the securities have not been automatically called
and if the ending price of the underlying stock is less than the threshold price, you will receive less, and up to 90% less, than the
face amount of your securities at maturity. |
| § | The appreciation potential of the securities is limited by the call payment
specified for each calculation day. The appreciation potential of the securities is limited to the call payment specified
for each calculation day if the underlying stock closes at or above the starting price on any calculation day. In all cases,
you will not participate in any appreciation of the underlying stock, which could be significant. |
| § | The market price will be influenced by many unpredictable factors. Several factors,
many of which are beyond our control, will influence the value of the securities in the secondary market and the price at which MS &
Co. may be willing to purchase or sell the securities in the secondary market. We expect that generally the level of interest
rates available in the market and the value of the underlying stock on any day, including in relation to the starting price and threshold
price, will affect the value of the securities more than any other factors. Other factors that may influence the value of the
securities include: |
| o | the trading price and volatility (frequency and magnitude of changes in value) of the underlying stock, |
| o | geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying stock or the
securities markets generally and which may affect the price of the underlying stock, |
| o | dividend rates on the underlying stock, |
| o | the time remaining until the securities mature, |
| o | interest and yield rates in the market, |
| o | the availability of comparable instruments, |
| o | the occurrence of certain events affecting the underlying stock that may or may not require an adjustment to the adjustment factor,
and |
| o | any actual or anticipated changes in our credit ratings or credit spreads. |
Generally, the longer the time remaining to maturity, the
more the market price of the securities will be affected by the other factors described above. Some or all of these factors
will influence the price that you will receive if you sell your securities prior to maturity. For example, you may have to
sell your securities at a substantial discount from the face amount of $1,000 per security if the price of the underlying stock at the
time of sale is near or below its threshold price or if market interest rates rise.
You cannot predict the future performance of the underlying
stock based on its historical performance. The price of the underlying stock may be, and has recently been, volatile, and we can give
you no assurance that the volatility will lessen. If the securities are not called and the ending price is less than the threshold price,
you will be exposed on a 1-to-1 basis to any decline in the ending price in excess of 10%. See “PayPal Holdings,
Inc. Overview” below.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
| § | The securities are subject to our credit risk, and any actual or anticipated changes to our credit
ratings or credit spreads may adversely affect the market value of the securities. You are dependent on our ability to
pay all amounts due on the securities upon an automatic call or at maturity, and therefore you are subject to our credit risk. If
we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the market value of the securities. |
| § | As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As
a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent
assets available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley.
Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued
by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should be treated pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities. |
| § | Investing in the securities is not equivalent to investing in the underlying stock. Investing
in the securities is not equivalent to investing in the underlying stock. Investors in the securities will not participate
in any positive performance of the underlying stock, and will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to the underlying stock. As a result, any return on the securities will not reflect the return you would
realize if you actually owned shares of the underlying stock and received the dividends paid or distributions made on them. |
| § | Reinvestment risk. The term of your investment in the securities may be shortened
due to the automatic call feature of the securities. If the securities are called prior to maturity, you will receive no further
payments on the securities and may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable
terms or returns. |
| § | The rate we are willing to pay for securities of this type, maturity and issuance size is likely
to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the
inclusion of costs associated with issuing, selling, structuring and hedging the securities in the face amount reduce the economic terms
of the securities, cause the estimated value of the securities to be less than the face amount and will adversely affect secondary market
prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than the face
amount, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in
the face amount and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors. |
The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the face amount and the lower rate we are willing to pay as issuer make the economic terms of the securities
less favorable to you than they otherwise would be.
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 3 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 stock, and to our secondary market credit spreads, it would do so based on values higher than the estimated
value, and we expect that those higher values will also be reflected in your brokerage account statements.
| § | The estimated value of the securities is determined by reference to our pricing and valuation models,
which may differ from those of other dealers and is not a maximum or minimum secondary market |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
price. These pricing and valuation models
are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove
to be incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield
a higher estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to
value the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at
which dealers, including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The
value of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many
unpredictable factors” above.
| § | The securities will not be listed on any securities exchange and secondary trading may be limited. The
securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS
& Co. and WFS may, but are not obligated to, make a market in the securities and, if either of them once chooses to make a market,
may cease doing so at any time. When they do make a market, they will generally do so for transactions of routine secondary
market size at prices based on their respective estimates of the current value of the securities, taking into account their respective
bid/offer spreads, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging
positions, the time remaining to maturity and the likelihood that they will be able to resell the securities. Even if there
is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other
broker-dealers may not participate significantly in the secondary market for the securities, the price at which you may be able to trade
your securities is likely to depend on the price, if any, at which MS & Co. or WFS is willing to transact. If, at any time,
MS & Co. and WFS were to cease making a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly,
you should be willing to hold your securities to maturity. |
| § | The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make
determinations with respect to the securities. As calculation agent, MS & Co. will determine the starting price, the
threshold price and the ending price and will calculate the amount of cash you receive at maturity. Moreover, certain determinations
made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such
as with respect to the occurrence or non-occurrence of market disruption events and certain adjustments to the adjustment factor. These
potentially subjective determinations may adversely affect the payout to you at maturity. For further information regarding
these types of determinations, see “General Terms of the Securities— Certain Terms for Securities Linked to an Underlying
Stock—Market Disruption Events,” “—Adjustment Events,” “—Consequences of a Market Disruption
Event; Postponement of a Calculation Day,” “—Alternate Exchange Calculation in Case of an Event of Default” and
related definitions in the accompanying product supplement for principal at risk securities. In addition, MS & Co. has
determined the estimated value of the securities on the pricing date. |
| § | Hedging and trading activity by our affiliates could potentially adversely affect the value of the
securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to
the securities (and possibly to other instruments linked to the underlying stock), including trading in the underlying stock. As
a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may
involve greater and more frequent dynamic adjustments to the hedge as the final calculation day approaches. Some of our affiliates
also trade the underlying stock and other financial instruments related to the underlying stock on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially affect
the starting price of the underlying stock, and, therefore, could increase (i) the price at or above which the underlying stock must close
on the calculation days so that the securities are called for the call payment and (ii) the threshold price for the underlying stock,
which is the price at or above which the underlying stock must close on the final calculation day so that you do not suffer a loss on
your initial investment in the securities. Additionally, such hedging or trading activities during the term of the securities
could potentially affect the value of the underlying stock on the calculation days, and, accordingly, whether we call the securities prior
to maturity and the amount of cash you will receive at maturity. |
| § | The maturity date may be postponed if the final calculation day is postponed. If the
scheduled final calculation day is not a trading day or if a market disruption event occurs on that day so that the final calculation
day is |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
postponed and falls less than three business days prior
to the maturity date, the maturity date of the securities will be postponed to the third business day following that final calculation
day as postponed.
| § | Potentially inconsistent research, opinions or recommendations by Morgan Stanley, MSFL, WFS or our
or their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates may publish research from
time to time on financial markets and other matters that may influence the value of the securities, or express opinions or provide recommendations
that are inconsistent with purchasing or holding the securities. Any research, opinions or recommendations expressed by Morgan
Stanley, MSFL, WFS or our or their respective affiliates may not be consistent with each other and may be modified from time to time without
notice. Investors should make their own independent investigation of the merits of investing in the securities and the underlying stock
to which the securities are linked. |
| § | The U.S. federal income tax consequences of an investment in the securities are uncertain. Please
read the discussion under “Additional Information About the Securities – Tax considerations” in this document and the
discussion under “United States Federal Taxation” in the accompanying product supplement for principal at risk securities
(together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities.
There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a
ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of
the securities are uncertain, and the IRS or a court might not agree with the tax treatment of a security as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes. If the IRS were successful in asserting an
alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities, including the timing
and character of income recognized by U.S. Holders and the withholding tax consequences to Non-U.S. Holders, might be materially and adversely
affected. Moreover, future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal tax treatment of
the securities, possibly retroactively. |
Both U.S. and Non-U.S. Holders should consult their tax
advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments,
as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Risks Relating to the Underlying Stock
| § | No affiliation with PayPal Holdings, Inc. PayPal Holdings, Inc. is not an affiliate of ours,
is not involved with this offering in any way, and has no obligation to consider your interests in taking any corporate actions that might
affect the value of the securities. We have not made any due diligence inquiry with respect to PayPal Holdings, Inc. in connection
with this offering. |
| § | We may engage in business with or involving PayPal Holdings, Inc. without regard to your interests. We
or our affiliates may presently or from time to time engage in business with PayPal Holdings, Inc. without regard to your interests and
thus may acquire non-public information about PayPal Holdings, Inc. Neither we nor any of our affiliates undertakes to disclose
any such information to you. In addition, we or our affiliates from time to time have published and in the future may publish
research reports with respect to PayPal Holdings, Inc., which may or may not recommend that investors buy or hold the underlying stock. |
| § | The antidilution adjustments the calculation agent is required to make do not cover every corporate
event that could affect the underlying stock. MS & Co., as calculation agent, will adjust the adjustment factor for
certain corporate events affecting the underlying stock, such as stock splits, stock dividends and extraordinary dividends, and certain
other corporate actions involving the issuer of the underlying stock, such as mergers. However, the calculation agent will
not make an adjustment for every corporate event that can affect the underlying stock. For example, the calculation agent is not required
to make any adjustments if the issuer of the underlying stock or anyone else makes a partial tender or partial exchange offer for the
underlying stock, nor will adjustments be made following the calculation day. In addition, no adjustments will be made for regular cash
dividends, which are expected to reduce the price of the underlying stock by the amount of such dividends. If an event occurs that does
not require the calculation agent to adjust the adjustment factor, such as a regular cash dividend, the market price of the securities
and your return on the securities may be materially and adversely affected. |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
| § |
Historical closing prices of the underlying stock should not be taken as an indication of the future performance of the underlying stock
during the term of the securities. No assurance can be given as to the price of the underlying stock at any time, including
on the final calculation day, because historical closing prices of the underlying stock do not provide an indication of future performance
of the underlying stock. |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
PayPal Holdings, Inc. Overview |
PayPal Holdings, Inc. is a technology platform and digital payments
company. The underlying stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information
provided to or filed with the Securities and Exchange Commission by PayPal Holdings, Inc. pursuant to the Exchange Act can be located
by reference to the Securities and Exchange Commission file number 001-36859 through the Securities and Exchange Commission’s website
at www.sec.gov. In addition, information regarding PayPal Holdings, Inc. may be obtained from other sources including, but
not limited to, press releases, newspaper articles and other publicly disseminated documents. Neither the issuer nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding the issuer of the underlying
stock is accurate or complete.
The following graph sets forth the daily closing prices of the underlying
stock for the period from January 1, 2019 through July 23, 2024. The closing price of the underlying stock on July 23, 2024 was $59.71. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The historical
closing prices of the underlying stock may have been adjusted for stock splits and other corporate events. The historical performance
of the underlying stock should not be taken as an indication of future performance, and no assurance can be given as to the closing price
of the underlying stock at any time, including on the calculation days.
Common Stock of PayPal
Holdings, Inc. Daily Closing Prices
January 1, 2019 to July
23, 2024 |
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324010643/image_009.jpg) |
This document relates only to the securities offered hereby and
does not relate to the underlying stock or other securities of PayPal Holdings, Inc. We have derived all disclosures contained in this
document regarding the underlying stock from the publicly available documents described above. In connection with the offering
of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with
respect to PayPal Holdings, Inc. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding PayPal Holdings, Inc. is accurate or complete. Furthermore, we cannot give any assurance
that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the underlying stock (and therefore the price of the underlying stock
at the time we price the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning PayPal Holdings, Inc. could affect the value received with respect to the
securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the underlying stock.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
Additional Information About the Securities |
Minimum ticketing size
$1,000 / 1 security
Tax considerations
Although there is uncertainty regarding the U.S. federal income tax
consequences of an investment in the securities due to the lack of governing authority, in the opinion of our counsel, Davis Polk &
Wardwell LLP, under current law, and based on current market conditions, it is reasonable to treat a security as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion
is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.
Assuming this treatment of the securities is respected
and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for principal at
risk securities, the following U.S. federal income tax consequences should result based on current law:
| § | A U.S. Holder should not be required to recognize taxable income over the term of the securities prior
to settlement, other than pursuant to a sale or exchange. |
| § | Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal
to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term
capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise. |
We do not plan to request a ruling from the Internal Revenue Service
(the “IRS”) regarding the treatment of the securities. An alternative characterization of the securities could
materially and adversely affect the tax consequences of ownership and disposition of the securities, including the timing and character
of income recognized. In addition, the U.S. Treasury Department and the IRS have requested comments on various issues regarding
the U.S. federal income tax treatment of “prepaid forward contracts” and similar financial instruments and have indicated
that such transactions may be the subject of future regulations or other guidance. Furthermore, members of Congress have proposed
legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly
with retroactive effect.
As discussed in the accompanying product supplement for principal at
risk securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury regulations promulgated thereunder (“Section
871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid or deemed paid
to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities (each,
an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities that substantially
replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable Treasury
regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to securities
issued before January 1, 2027 that do not have a delta of one with respect to any Underlying Security. Based on the terms of
the securities and current market conditions, we expect that the securities will not have a delta of one with respect to any Underlying
Security on the pricing date. However, we will provide an updated determination in the final pricing supplement. Assuming
that the securities do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the securities
should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may disagree
with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If withholding is required, we will not be
required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding
the potential application of Section 871(m) to the securities.
Both U.S. and non-U.S. investors considering an investment in the
securities should read the discussion under “Risk Factors” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for principal at risk securities and consult their tax advisers regarding
all aspects of the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments,
and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Common Stock of PayPal Holdings, Inc. due August 5, 2027
The discussion in the preceding paragraphs under “Tax considerations”
and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement
for principal at risk securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions
with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of an investment in the securities.
Additional considerations
Client accounts over which Morgan Stanley, Morgan
Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities,
either directly or indirectly.
Supplemental information regarding plan of distribution; conflicts
of interest
MS & Co. and WFS will act as the agents for
this offering. WFS will receive a commission of up to $25.75 for each security it sells. WFS proposes to offer the
securities in part directly to the public at the price to public set forth on the cover page of this document and in part to Wells Fargo
Advisors (“WFA”) (the trade name of the retail brokerage business of WFS’s affiliates, Wells Fargo Clearing Services,
LLC and Wells Fargo Advisors Financial Network, LLC), an affiliate of WFS, or other securities dealers at such price less a selling concession
of up to $20.00 per security. In addition to the selling concession allowed to WFA, WFS may pay $0.75 per security of the commission
to WFA as a distribution expense fee for each security sold by WFA.
In addition, in respect of certain securities sold
in this offering, we may pay a fee of up to $3.50 per security to selected securities dealers in consideration for marketing and other
services in connection with the distribution of the securities to other securities dealers.
See “Plan of Distribution (Conflicts of Interest)”
in the accompanying product supplement for principal at risk securities for information about the distribution arrangements for the securities. References
therein to “agent” refer to each of MS & Co. and WFS, as agents for this offering, except that references to “agent”
in the context of offers to certain Morgan Stanley dealers and compliance with FINRA Rule 5121 do not apply to WFS. MS &
Co., WFS or their affiliates may enter into hedging transactions with us in connection with this offering.
MS & Co. is an affiliate of MSFL and a wholly
owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable,
hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities
such that for each security the estimated value on the pricing date will be no lower than the minimum level described in “Estimated
Value of the Securities” beginning on page 4.
MS & Co. 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 “Plan of Distribution (Conflicts of
Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
Where you can find more information
Morgan Stanley and MSFL have filed a registration
statement (including a prospectus, as supplemented by the product supplement for principal at risk securities) with the Securities and
Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration
statement, the product supplement for principal at risk securities and any other documents relating to this offering that Morgan Stanley
and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering. When you read the accompanying
product supplement, please note that all references in such supplement 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.
You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively,
Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the product supplement for
principal at risk securities and prospectus if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site
at.www.sec.gov as follows:
Product Supplement for Principal at Risk Securities dated November 16, 2023
Prospectus dated April 12, 2024
Terms used but not defined in this document are
defined in the product supplement for principal at risk securities or in the prospectus.
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