May 2024
Preliminary Pricing Supplement No. 2,232
Registration Statement Nos. 333-275587;
333-275587-01
Dated May 9, 2024
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S.
Equities
Market Linked
Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk
Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Fully and
Unconditionally Guaranteed by Morgan Stanley
§
Linked to the S&P 500® Equal Weight Index
§
The securities offered are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities will pay no interest, provide
for a payment at maturity that may be significantly less than the face amount and have the terms described in the accompanying product
supplement for principal at risk securities, index supplement and prospectus, as supplemented or modified by this document. At maturity:
§
If the level of the underlying index has increased, investors will receive
the face amount plus a positive return equal to 100% of the percentage increase in the level of the underlying index from the starting
level, subject to a maximum return at maturity of at least 83% (to be determined on the pricing date) of the face amount. As a result
of the maximum return, the maximum maturity payment amount will be at least $1,830 per security.
§
If the level of the underlying index has decreased, but the underlying
index has not decreased by more than 18%, investors will receive the face amount.
§
If the underlying index has decreased by more than 18%, investors will
have 1-to-1 downside exposure to the decrease in the level of the underlying index from the starting level in excess of 18%.
§
Investors may lose up to 82% of the face amount of the securities.
§
The securities are for investors who seek an equity index-based return
and who are willing to risk their investment and forgo current income and upside above the maximum return in exchange for the participation
rate and buffer features that in each case apply to a limited range of performance of the underlying index.
§
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 index. |
The current estimated value of the securities is approximately
$937.80 per security, or within $30.00 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 index, instruments based on the underlying index, 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 3.
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, index
supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement for principal at risk securities, index supplement and prospectus, each of which can be accessed via the hyperlinks below.
When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus
dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the
corresponding sections of such prospectus, as applicable. Please also see “Additional 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 |
$33.25 |
$966.75 |
Total |
$ |
$ |
$ |
| (1) | Wells Fargo Securities, LLC, an agent for this offering,
will receive a commission of up to $33.25 for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”), may
receive a selling concession of up to $27.50 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 $4.00 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. |
Product
Supplement for Principal at Risk Securities dated November 16, 2023 Index
Supplement dated November 16, 2023
Prospectus
dated April 12, 2024
Morgan Stanley |
Wells Fargo Securities |
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Terms |
Issuer: |
Morgan Stanley Finance LLC |
Guarantor: |
Morgan Stanley |
Maturity
date: |
May 18, 2028†, subject to postponement if the calculation day is postponed* |
Market
measure: |
S&P 500® Equal Weight Index (the “underlying index”) |
Underlying
index publisher: |
S&P Dow Jones Indices LLC, or any successor thereof |
Maturity
payment amount: |
At maturity, the maturity payment amount per $1,000 face amount of securities
will be determined as follows:
·
If the ending level is greater than the starting level:
$1,000 plus the lesser of
·
If the ending level is less than or equal to the starting level, but greater
than or equal to the threshold level:
$1,000
·
If the ending level is less than the threshold level:
$1,000 plus
If the ending level is less than the threshold level, you will receive
less, and up to 82% less, than the face amount of your securities at maturity. |
Index
return: |
|
Participation
rate: |
100% |
Starting
level: |
, which is the closing level of the underlying index on the pricing date |
Ending
level: |
The closing level of the underlying index on the calculation day |
Calculation
day: |
May 15, 2028**† |
Threshold
level: |
, which is 82% of the starting level |
Buffer
Amount: |
18% |
Maximum
return: |
The “maximum return” will be determined on the pricing date and will be at least 83% of the face amount per security (at least $830 per security). As a result of the maximum return, the maximum maturity payment amount will be at least $1,830 per security. |
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: |
May 15, 2024† |
Original
issue date: |
May 20, 2024† (3 business days after the pricing date) |
CUSIP
/ ISIN: |
61776L4K0 / US61776L4K01 |
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 day 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—Payment
Dates” in the accompanying product supplement for principal at risk securities.
** 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—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
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 $937.80, or within $30.00 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 index. The estimated value of
the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying index,
instruments based on the underlying index, 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 maximum
return, the participation rate and the threshold level, 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 index, 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 4 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 index, 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—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
The Principal at Risk Securities Linked to the S&P 500®
Equal Weight Index due May 18, 2028 (the “securities”) can be used:
| § | As an alternative to direct exposure to the underlying index that provides returns
based on the performance of the underlying index, subject to the maximum return |
| § | To achieve similar levels of upside exposure to the underlying index as a direct
investment, subject to the maximum return |
| § | To obtain a buffer against a specified level of negative performance in the underlying
index |
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 |
| § | Are unwilling to accept the risk that the ending level of the underlying index may
decrease by more than 18% from the starting level, resulting in a loss of some or a significant portion of the initial investment |
| § | Seek uncapped exposure to the upside performance of the underlying index |
| § | Seek full return of the face amount of the securities at maturity |
| § | Seek current income from their investments |
| § | Seek exposure to the underlying index but are unwilling to accept the risk/return
trade-offs inherent in the payment at maturity for the securities |
| § | Are unwilling to accept our credit risk |
| § | 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 index, please see the section titled “S&P 500® Equal Weight Index” below.
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Determining Payment at Maturity |
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Payoff Diagram
The payoff diagram below illustrates the maturity payment amount on the securities
based on the following terms:
Face amount: |
$1,000 per security |
Participation rate: |
100% |
Threshold level: |
82% of the starting level |
Hypothetical maximum return: |
83% of the face amount ($830 per security). The actual maximum return will be determined on the pricing date. |
Securities
Payoff Diagram |
|
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Scenario Analysis and Examples of Maturity Payment Amount at Maturity |
The following scenario analysis and examples
are provided for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible scenario
concerning increases or decreases in the level of the underlying index relative to the starting level. We cannot predict the ending level
on the calculation day. You should not take the scenario analysis and these examples as an indication or assurance of the expected performance
of the underlying index. The numbers appearing in the examples below may have been rounded for ease of analysis. Notwithstanding anything
to the contrary in the accompanying product supplement for principal at risk securities, the amount you will receive per
$1,000 face amount of securities at maturity will be the maturity payment amount, defined and calculated as provided in this document.
The following scenario analysis and examples illustrate the payment at maturity on a hypothetical offering of the securities, based on
the following terms*:
Investment term: |
Approximately 4 years |
Hypothetical starting level: |
100.00 |
Threshold level: |
82.00 (82% of the hypothetical starting level) |
Participation rate: |
100% |
Hypothetical maximum return: |
83% of the face amount ($830 per security) |
* The hypothetical starting
level of 100.00 has been chosen for illustrative purposes only and does not represent the actual starting level. The actual starting level
and maximum return will be determined on the pricing date and will be set forth under “Terms” above. For historical data regarding
the actual closing levels of the underlying index, see the historical information set forth herein.
Example 1—The level of the underlying index
increases from a starting level of 100.00 to an ending level of 120.00.
Because the hypothetical ending level is greater
than the hypothetical starting level, the maturity payment amount would equal $1,000 plus a
positive return equal to the lesser of:
| (i) | $1,000 × index return × participation rate
$1,000 × 20% × 100%
= $200.00, and |
| (ii) | the maximum return of $830 |
On the maturity date, you would receive the maturity
payment amount equal to $1,200.00 per $1,000 face amount of securities, resulting in a total return on the securities of 20.00%.
Example 2—The level of the underlying index increases
from a starting level of 100.00 to an ending level of 200.00.
Because the hypothetical ending level is greater than the hypothetical
starting level, the maturity payment amount would equal $1,000 plus a positive return equal to the lesser of:
| (i) | $1,000 × index return × participation rate
$1,000 × 100% × 100%
= $1,000.00, and |
| (ii) | the maximum return of $830 |
On the maturity date, you would receive the maturity payment
amount equal to $1,830 per $1,000 face amount of securities (which is the maximum maturity payment amount), resulting in a total return
on the securities of 83%. The appreciation potential of the securities is limited by the hypothetical maximum return. Although the participation
rate provides 100% exposure to any increase in the ending level over the starting level, because the maturity payment amount will be limited
to 183% of the face amount for the securities (assuming a maximum return of $830 per security), any increase in the ending level over
the starting level by more than 83% of the starting level will not further increase the return on the securities.
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Example 3—The level of the underlying index
decreases from a starting level of 100.00 to an ending level of 95.00.
Because the hypothetical ending level is less than or equal
to the hypothetical starting level but greater than or equal to the hypothetical threshold level, the maturity payment amount would equal:
$1,000
Because the hypothetical ending level is less
than or equal to the hypothetical starting level but greater than or equal to the hypothetical threshold level, you would receive the
maturity payment amount equal to $1,000 per $1,000 face amount of securities, resulting in a total return on the securities of
0%.
Example 4—The level of the underlying index
decreases from a starting level of 100.00 to an ending level of 50.00.
Because the hypothetical ending level is less than the hypothetical
starting level by more than 18%, you would lose a significant portion of the face amount of your securities and receive the maturity payment
amount equal to:
$1,000 + [$1,000 × (index return
+ buffer amount)]
Because the ending level is below the threshold level on the
calculation day, the securities will be exposed on a 1-to-1 basis to any decline in the level of the underlying index in excess of 18%.
Therefore, the maturity payment amount is equal to $680.00 per $1,000 face amount of securities, resulting in a total loss on the securities
of 32%.
If the ending level is below the threshold level on the
calculation day, the securities will be exposed on a 1-to-1 basis to any decline in the level of the underlying index in excess of 18%.
You may lose up to 82% of the face amount of your securities at maturity.
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Scenario Analysis – Hypothetical Maturity Payment
Amount for each $1,000 Face Amount of Securities.
Performance of the
Underlying Index* |
Performance of the
Securities(1) |
Ending Level |
Percentage Change
from the Starting Level to the Ending Level |
Maturity Payment
Amount |
Return on Securities(2) |
200.00 |
100.00% |
$1,830.00 |
83.00% |
190.00 |
90.00% |
$1,830.00 |
83.00% |
183.00 |
83.00% |
$1,830.00 |
83.00% |
180.00 |
80.00% |
$1,800.00 |
80.00% |
170.00 |
70.00% |
$1,700.00 |
70.00% |
160.00 |
60.00% |
$1,600.00 |
60.00% |
150.00 |
50.00% |
$1,500.00 |
50.00% |
140.00 |
40.00% |
$1,400.00 |
40.00% |
130.00 |
30.00% |
$1,300.00 |
30.00% |
120.00 |
20.00% |
$1,200.00 |
20.00% |
110.00 |
10.00% |
$1,100.00 |
10.00% |
105.00 |
5.00% |
$1,050.00 |
5.00% |
100.00(3) |
0.00% |
$1,000.00 |
0.00% |
95.00 |
-5.00% |
$1,000.00 |
0.00% |
90.00 |
-10.00% |
$1,000.00 |
0.00% |
85.00 |
-15.00% |
$1,000.00 |
0.00% |
82.00 |
-18.00% |
$1,000.00 |
0.00% |
80.00 |
-20.00% |
$980.00 |
-2.00% |
70.00 |
-30.00% |
$880.00 |
-12.00% |
60.00 |
-40.00% |
$780.00 |
-22.00% |
50.00 |
-50.00% |
$680.00 |
-32.00% |
40.00 |
-60.00% |
$580.00 |
-42.00% |
30.00 |
-70.00% |
$480.00 |
-52.00% |
20.00 |
-80.00% |
$380.00 |
-62.00% |
10.00 |
-90.00% |
$280.00 |
-72.00% |
0.00 |
-100.00% |
$180.00 |
-82.00% |
*The underlying index excludes cash
dividend payments on stocks included in the underlying index.
(1) Assumes a maximum
return of 83% of the face amount ($830 per security).
(2) The “Return
on Securities” is the number, expressed as a percentage, which results from comparing the maturity payment amount per $1,000 face
amount of securities to the purchase price of $1,000 per security.
(3) The hypothetical starting level
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
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, index supplement 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, and you will receive less, and up to 82% less,
than the face amount of your securities at maturity if the ending level is less than the threshold level. The terms of the securities
differ from those of ordinary debt securities in that the securities do not pay interest or repay a fixed amount of the face amount of
the securities. If the ending level is less than the threshold level, which is 82% of the starting level, you will receive less, and up
to 82% less, than the face amount of your securities at maturity. Investors may lose some or a significant portion of their investment
in the securities. |
| § | The appreciation potential of the securities is limited by the maximum return.
The appreciation potential of the securities is limited by the maximum return. Although the participation rate provides 100% exposure
to any increase in the ending level over the starting level, because any positive return on the securities will be limited to the maximum
return of at least 83% of the face amount for the securities, any increase in the ending level over the starting level by more than at
least 83% of the starting level, depending on the actual maximum return, will not further increase the return on the securities. |
| § | 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. or any other dealer may be willing to purchase or sell the securities in the secondary market, including the level, volatility
(frequency and magnitude of changes in level) and dividend yield of the underlying index, interest and yield rates in the market, time
remaining to maturity, geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying
index or equities markets generally and which may affect the ending level of the underlying index and 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. The level of the underlying index may be, and has recently been, volatile, and
we can give you no assurance that the volatility will lessen. See “S&P 500® Equal Weight Index Overview”
below. You may receive less, and up to 82% less, than the face amount per security if you try to sell your securities prior to maturity. |
| § | 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 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. |
| § | The amount payable on the securities is not linked to the value of the underlying
index at any time other than the calculation day. The ending level will be based on the closing level of the underlying index on the
|
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
calculation day, subject to postponement for non-trading
days and certain market disruption events. Even if the level of the underlying index increases prior to the calculation day but then decreases
by the calculation day, the maturity payment amount will be less, and may be significantly less, than it would have been had the maturity
payment amount been linked to the level of the underlying index prior to such decrease. Although the actual level of the underlying index
on the maturity date or at other times during the term of the securities may be higher than the ending level, the maturity payment amount
will be based solely on the closing level of the underlying index on the calculation day.
| § | Investing in the securities is not equivalent to investing in the underlying index.
Investing in the securities is not equivalent to investing in the underlying index or its component stocks. Investors in the securities
will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the stocks that
constitute the underlying index. |
| § | 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
4 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 index, 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 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 |
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
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
level, the threshold level and the ending level 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 the selection of a successor index or calculation
of the ending level in the event of a market disruption event or discontinuance of the underlying index. 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—Market Disruption Events,” “—Adjustments to an Index,” “—Discontinuance
of an Index,” “—Consequences of a Market Disruption Event; Postponement of a Calculation Day” and “Alternate
Exchange Calculation in Case of an Event of Default” 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 index or its component stocks), including trading in the
stocks that constitute the underlying index as well as in other instruments related to the underlying index. 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 calculation day approaches. Some of our affiliates also trade the stocks that constitute
the underlying index and other financial instruments related to the underlying index 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
level, and, therefore, could increase the level at or above which the underlying index must close on the calculation day so that investors
do not suffer a loss on their initial investment in the securities. Additionally, such hedging or trading activities during the term of
the securities, including on the calculation day, could adversely affect the level of the underlying index on the calculation day, and,
accordingly, the amount of cash an investor will receive at maturity. |
| § | The maturity date may be postponed if the calculation day is postponed. If
the scheduled calculation day is not a trading day or if a market disruption event occurs on that day so that the calculation day is 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 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
index 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. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the
timing and character of income on the securities might differ significantly from the tax treatment described in the Tax Disclosure Sections.
For example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S.
Holders would be required to accrue into income original issue discount on the securities every year at a “comparable yield”
determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income. The risk that financial
instruments providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized
|
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features. We do not plan to request a ruling from the IRS regarding the tax
treatment of the securities, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.
In 2007, the U.S. Treasury Department and the
IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their
investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status
of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income
(including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are
or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain long-term
capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition rules and
effective dates, any 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. 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, the issues presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction.
Risks Relating to the Underlying Index
| § | Adjustments to the underlying index could adversely affect the value of the securities.
The underlying index publisher may add, delete or substitute the stocks constituting the underlying index or make other methodological
changes that could change the value of the underlying index. The underlying index publisher may discontinue or suspend calculation or
publication of the underlying index at any time. In these circumstances, the calculation agent will have the sole discretion to substitute
a successor index that is comparable to the discontinued underlying index and is permitted to consider indices that are calculated and
published by the calculation agent or any of its affiliates. If the calculation agent determines
that there is no appropriate successor index, the maturity payment amount on the securities will be an amount based on the closing prices
at maturity of the securities composing the underlying index at the time of such discontinuance, without rebalancing or substitution,
computed by the calculation agent in accordance with the formula for calculating the underlying index last in effect prior to discontinuance
of the underlying index. |
| § | Historical levels of the underlying index should not be taken as an indication
of the future performance of the underlying index during the term of the securities. No assurance can be given as to the level of
the underlying index at any time, including on the calculation day, because historical levels of the underlying index do not provide an
indication of future performance of the underlying index. |
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
S&P 500® Equal Weight Index Overview |
The S&P 500® Equal Weight Index is the equal-weight version
of the S&P 500® Index. The index includes the same constituents as the capitalization-weighted S&P 500®
Index, but each company in the S&P 500® Equal Weight Index is allocated a fixed weight of 0.2% of the index total at
each quarterly rebalancing. Therefore, the performance of the S&P 500® Equal Weight Index will differ, perhaps materially,
from the performance of the S&P 500® Index, which is weighted unevenly based on market capitalization.
The S&P 500® Index, which is calculated, maintained and
published by S&P® Dow Jones Indices LLC (“S&P®”), is intended to provide a benchmark
for performance measurement of the large capitalization segment of the U.S. equity markets by tracking the stock price movement of 500
companies with large market capitalizations. Component stocks of the S&P 500® Index are required to have a total company
level market capitalization that reflects approximately the 85th percentile of the S&P® Total Market Index.
The S&P 500® Index measures the relative performance of the common stocks of 500 companies as of a particular time
as compared to the performance of the common stocks of 500 similar companies during the base period of the years 1941 through 1943. For
additional information about the S&P 500® Equal Weight Index, see the information set forth under “S&P®
U.S. Indices” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the underlying index
for each quarter in the period from January 1, 2019 through May 8, 2024. The closing level of the underlying index on May 8, 2024 was
6,665.56. We obtained the information in the graph and table below from Bloomberg Financial Markets without independent verification.
The underlying index has at times experienced periods of high volatility. You should not take the historical levels of the underlying
index as an indication of its future performance, and no assurance can be given as to the closing level of the index on the calculation
day.
S&P 500® Equal
Weight Index
Daily Closing Levels
January 1, 2019 to May 8, 2024 |
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of Standard
and Poor’s Financial Services LLC. For more information, see “S&P® U.S. Indices” in the accompanying
index supplement.
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
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, a security should be treated 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. |
In 2007, the U.S. Treasury
Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal income tax
treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders
of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including
the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual
regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which
the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should
be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule,
which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any 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, 2025 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, the issues presented by the aforementioned notice 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—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
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 $33.25 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 $27.50 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 $4.00 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,
including the maximum return, 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 3.
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 for principal at risk securities.
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 and the index supplement) 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, the index supplement 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 and index supplement, please note that all references in such supplements
to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April
12, 2024 or to the corresponding sections of such prospectus, as applicable. 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, index supplement 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
Index
Supplement dated November 16, 2023
Prospectus
dated April 12, 2024
Morgan Stanley Finance LLC
Market Linked Securities—Upside Participation to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the S&P 500® Equal Weight Index due May 18, 2028
Terms used but not defined in this document are defined
in the product supplement for principal at risk securities, in the index supplement or in the prospectus.
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