The information in this preliminary pricing supplement is not
complete and may be changed. We may not deliver these notes until a
final pricing supplement is delivered. This preliminary pricing
supplement and the accompanying prospectus, product supplement and
index supplement do not constitute an offer to sell these notes and
we are not soliciting an offer to buy these notes in any state
where the offer or sale is not permitted.
Subject to Completion, Preliminary Pricing Supplement dated
February 2, 2023
| PROSPECTUS
Dated November 16, 2020 |
Pricing
Supplement No. 7,898 to |
| PRODUCT
SUPPLEMENT Dated November 16, 2020 |
Registration
Statement Nos. 333-250103; 333-250103-01 |
| INDEX
SUPPLEMENT Dated November 16, 2020 |
Dated ,
2023 |
| |
Rule
424(b)(2) |
|
Morgan
Stanley Finance LLC
STRUCTURED
INVESTMENTS
Opportunities
in U.S. Equities
|
$
Digital S&P 500®
Index-Linked Notes due
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk
Securities
The notes are unsecured
obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully
and unconditionally guaranteed by Morgan Stanley. The notes will
not bear interest. The amount
that you will be paid on your notes on the stated maturity date
(expected to be the second scheduled business day after the
determination date) is based on the performance of the S&P
500® Index as measured from the trade date to and
including the determination date (expected to be between 17 and 20
months after the trade date). If the final underlier level on the
determination date is greater than or equal to 82.50% of the
initial underlier level (which will be set on the trade date and
may be higher or lower than the actual closing level of the
underlier on the trade date), you will receive an amount equal to
the maximum settlement amount (expected to be between $1,114.70 and
$1,135.00 for each $1,000 face amount of your notes).
However, if the underlier declines by more than 17.50% from the
initial underlier level, the return on your notes will be negative.
You could lose your entire investment in the notes.
The notes 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 notes are not secured obligations
and you will not have any security interest in, or otherwise have
any access to, any underlying reference asset or
assets.
To determine
your payment at maturity, we will calculate the underlier return,
which is the percentage increase or decrease in the final underlier
level from the initial underlier level. On the stated maturity
date, for each $1,000 face amount of your notes, you will receive
an amount in cash equal to:
|
● |
if the underlier return is greater than or equal
to -17.50% (the final underlier level is greater than or equal
to 82.50% of the initial underlier level), the maximum settlement
amount of $1,114.70 to $1,135.00 per note, or 111.47% to 113.50% of
the face amount (the actual maximum settlement amount will be
determined on the trade date); or |
|
● |
if the underlier return is less than -17.50% (the final
underlier level is less than 82.50% of the initial underlier
level), the sum of (i) $1,000 plus (ii) the
product of (a) $1,000 times
(b) approximately 1.2121 times (c) the sum
of the underlier return plus 17.50%. |
Under these circumstances, you will lose some or all of your
investment.
You should read the additional disclosure herein so that you may
better understand the terms and risks of your investment.
The estimated value on the trade date will be approximately
$996.00 per note, or within $15.00 of that estimate. See “Estimated
Value” on page 2.
|
|
Price to public(1)
|
Agent’s commissions
|
Proceeds to us(2)
|
| Per
note |
$1,000 |
$0 |
$1,000 |
| Total |
$ |
$ |
$ |
(1) Morgan Stanley & Co. LLC (“MS & Co.”) will sell all
of the notes that it purchases from us to an unaffiliated dealer at
the original issue price of 100.00%, or $1,000 per face amount of
notes. Such dealer will sell the notes to investors at the same
price without a discount or commission. Investors that purchase and
hold the notes in fee-based accounts may be charged fees based on
the amount of assets held in those accounts, including the notes.
For more information, see “Additional Information About the
Notes—Supplemental information regarding plan of distribution;
conflicts of interest.”
(2) See “Additional Information About the Notes—Use of proceeds
and hedging” beginning on page 19.
The notes involve risks not
associated with an investment in ordinary debt securities. See
“Risk Factors” beginning on page 10.
The Securities and Exchange
Commission and state securities regulators have not approved or
disapproved these notes, 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 notes are not deposits or
savings accounts and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency or
instrumentality, nor are they obligations of, or guaranteed by, a
bank.
You should read this document
together with the related product supplement, index supplement and
prospectus, each of which can be accessed via the hyperlinks below.
Please also see “Terms” on page 3 and “Additional Information About
the Notes” on page 19.
MORGAN STANLEY
|
About Your Prospectus
The notes are notes issued as part of MSFL’s Series A Global
Medium-Term Notes program. This prospectus includes this
preliminary pricing supplement and the accompanying documents
listed below. This preliminary pricing supplement constitutes a
supplement to the documents listed below and should be read in
conjunction with such documents:
●
Prospectus dated
November 16, 2020
●
Product Supplement
dated November 16, 2020
●
Index Supplement dated
November 16, 2020
The information in this preliminary pricing supplement supersedes
any conflicting information in the documents listed above. In
addition, some of the terms or features described in the listed
documents may not apply to your notes.
|
ESTIMATED VALUE
The Original Issue Price of each note is $1,000. This price
includes costs associated with issuing, selling, structuring and
hedging the notes, which are borne by you, and, consequently, the
estimated value of the notes on the Trade Date will be less than
$1,000. We estimate that the value of each note on the Trade Date
will be approximately $996.00, or within $15.00 of that estimate.
Our estimate of the value of the notes as determined on the Trade
Date will be set forth in the final pricing supplement.
What goes into the estimated value on the Trade Date?
In valuing the notes on the Trade Date, we take into account that
the notes comprise both a debt component and a performance-based
component linked to the Underlier. The estimated value of the notes
is determined using our own pricing and valuation models, market
inputs and assumptions relating to the Underlier, instruments based
on the Underlier, 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 notes?
In determining the economic terms of the notes, including the
Maximum Settlement Amount and the Threshold Amount, 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 notes would be more favorable to
you.
What is the relationship between the estimated value on the
Trade Date and the secondary market price of the notes?
The price at which MS & Co. purchases the notes in the
secondary market, absent changes in market conditions, including
those related to the Underlier, may vary from, and be lower than,
the estimated value on the Trade 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 notes 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 notes in the
secondary market, absent changes in market conditions, including
those related to the Underlier, 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
notes, and, if it once chooses to make a market, may cease doing so
at any time.
SUMMARY
INFORMATION
|
The Digital S&P 500® Index-Linked Notes, which we
refer to as the notes, are unsecured obligations of MSFL and are
fully and unconditionally guaranteed by Morgan Stanley. The notes
will pay no interest, do not guarantee any return of principal at
maturity and have the terms described in the accompanying product
supplement, index supplement and prospectus, as supplemented or
modified by this document. The notes are notes issued as part of
MSFL’s Series A Global Medium-Term Notes program.
References to “we,” “us” and “our” refer to Morgan Stanley or
MSFL, or Morgan Stanley and MSFL collectively, as the context
requires.
|
Terms
Capitalized
terms used but not defined herein have the meanings assigned to
them in the accompanying product supplement and prospectus. All
references to “Buffer Rate,” “Cash Settlement Amount,” “Closing
Level,” “Determination Date,” “Face Amount,” “Final Underlier
Level,” “Initial Underlier Level,” “Original Issue Price,” “Stated
Maturity Date,” “Threshold Amount,” “Trade Date,” “Underlier” and
“Underlier Return” herein shall be deemed to refer to “downside
factor,” “payment at maturity,” “index closing value,” “valuation
date,” “stated principal amount,” “final index value,” “initial
index value,” “issue price,” “maturity date,” “buffer amount,”
“pricing date,” “underlying index” and “index percent change”
respectively, as used in the accompanying product
supplement.
If the terms
described herein are inconsistent with those described in the
accompanying product supplement or prospectus, the terms described
herein shall control.
Issuer: Morgan Stanley Finance LLC
Guarantor: Morgan Stanley
Underlier: S&P 500® Index
Underlier Publisher: S&P Dow Jones Indices LLC
Notes: The accompanying product supplement refers to the
notes as the “jump securities.”
Specified currency: U.S. dollars (“$”)
Face Amount: Each note will have a Face Amount of $1,000; $
in the aggregate for all the notes; the aggregate Face
Amount of notes may be increased if the Issuer, at its sole option,
decides to sell an additional amount of the notes on a date
subsequent to the date hereof.
Denominations: $1,000 and integral multiples
thereof
Cash Settlement Amount (on the Stated Maturity Date): For
each $1,000 Face Amount of notes, we will pay you on the Stated
Maturity Date an amount in cash equal to:
|
· |
if the Final Underlier Level is greater than or equal
to the Threshold Level, the Maximum Settlement Amount; or |
|
· |
if the Final Underlier Level is less than the Threshold
Level, the sum of (i) $1,000 plus (ii) the
product of (a) $1,000 times (b) the Buffer
Rate times (c) the sum of the Underlier Return
and the Threshold Amount. |
You will lose some or all of your investment at maturity if the
Final Underlier Level is less than the Threshold Level.
Notwithstanding anything to the contrary in the accompanying
product supplement, you will receive the Maximum Settlement Amount
if the Final Underlier Level is greater than or equal to the
Threshold Level. Any payment of the Cash Settlement Amount is
subject to the credit risk of Morgan Stanley.
Initial Underlier Level: To be determined on the Trade Date.
The Initial Underlier Level may be higher or lower than the actual
Closing Level of the Underlier on the Trade Date; provided that the
Initial Underlier Level will not be higher than the highest level
of the Underlier on the Trade Date.
Final Underlier Level: The Closing Level of the Underlier on
the Determination Date, except in the limited circumstances
described under “Description of Securities—Postponement of
Valuation Date(s)” on page S-48 of the accompanying product
supplement, and subject to adjustment as provided under
“Description of Securities—Discontinuance of Any Underlying Index
or Basket Index; Alteration of Method of Calculation” on page S-51
of the accompanying product supplement.
Underlier Return: The quotient of (i) the Final
Underlier Level minus the Initial Underlier Level
divided by (ii) the Initial Underlier Level, expressed as a
percentage
Maximum Settlement Amount (to be set on the Trade Date):
Expected to be between $1,114.70
and $1,135.00 for each $1,000 Face Amount of notes (which is
comprised of the $1,000 Face Amount plus an upside payment
of between $114.70 and $135.00)
Threshold Level: 82.50% of the Initial Underlier Level
Threshold Amount: 17.50%
Buffer Rate: The quotient of the Initial Underlier
Level divided by the Threshold Level, which equals
approximately 121.21%
Trade Date:
Original Issue Date (Settlement Date) (to be set on the Trade
Date): Expected to be the fifth scheduled Business Day
following the Trade Date.
Determination Date (to be set on the Trade Date): Expected
to be between 17 and 20 months after the Trade Date, subject to
postponement as described in the accompanying product supplement on
page S-48 under “Description of Securities—Postponement of
Valuation Date(s).”
Stated Maturity Date (to be set on the Trade Date): Expected
to be the second scheduled Business Day following the Determination
Date, subject to postponement as described below. The Stated
Maturity Date is a pricing term and will be determined by us on the
Trade Date.
Postponement of Stated Maturity Date: If the scheduled
Determination Date is not a Trading Day or if a market disruption
event occurs on that day so that the Determination Date as
postponed falls less than two Business Days prior to the scheduled
Stated Maturity Date, the Stated Maturity Date of the notes will be
postponed to the second Business Day following that Determination
Date as postponed.
Closing Level: As described under “Description of
Securities—Some Definitions—index closing value” on page S-38 of
the accompanying product supplement.
Business Day: As described under “Description of
Securities—Some Definitions—business day” on page S-37 of the
accompanying product supplement.
Trading Day: As described under “Description of
Securities—Some Definitions—index business day” on page S-38 of the
accompanying product supplement. The accompanying product
supplement refers to a Trading Day as an “index business day.”
Market disruption event: The following replaces in its
entirety the section entitled “Description of Securities—Some
Definitions—market disruption event” on page S-37 of the
accompanying product supplement:
“Market disruption event” means, with respect to the Underlier:
(i) the occurrence or existence of:
|
(a) |
a suspension, absence or material limitation of trading of
securities then constituting 20 percent or more, by weight, of the
Underlier (or the successor index) on the relevant exchanges for
such securities for more than two hours of trading or during the
one-half hour period preceding the close of the principal trading
session on such relevant exchange, or |
|
(b) |
a breakdown or failure in the price and trade reporting systems
of any relevant exchange as a result of which the reported trading
prices for securities then constituting 20 percent or more, by
weight, of the Underlier (or the successor index), or futures or
options contracts, if available, relating to the Underlier (or the
successor index) or the securities |
then constituting 20 percent or more, by weight, of the Underlier
during the last one-half hour preceding the close of the principal
trading session on such relevant exchange are materially
inaccurate, or
|
(c) |
the suspension, material limitation or absence of trading on
any major U.S. securities market for trading in futures or options
contracts or exchange-traded funds related to the Underlier (or the
successor index), or in futures or options contracts, if available,
relating to securities then constituting 20 percent or more, by
weight, of the Underlier (or the successor index) for more than two
hours of trading or during the one-half hour period preceding the
close of the principal trading session on such market, |
in each case as determined by the calculation agent in its sole
discretion; and
(ii) a determination by the calculation agent in its sole
discretion that any event described in clause (i) above materially
interfered with our ability or the ability of any of our affiliates
to unwind or adjust all or a material portion of the hedge position
with respect to the notes.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the
Underlier is suspended, absent or materially limited at that time,
then the relevant percentage contribution of that security to the
value of the Underlier shall be based on a comparison of (x) the
portion of the value of the Underlier attributable to that security
relative to (y) the overall value of the Underlier, in each case
immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
has occurred: (1) a limitation on the hours or number of days of
trading will not constitute a market disruption event if it results
from an announced change in the regular business hours of the
relevant exchange or market, (2) a decision to permanently
discontinue trading in the relevant futures or options contract or
exchange-traded fund will not constitute a market disruption event,
(3) a suspension of trading in futures or options contracts or
exchange-traded funds on the Underlier, or futures or options
contracts, if available, relating to securities then constituting
20 percent or more, by weight, of the Underlier, by the primary
securities market trading in such contracts or funds by reason of
(a) a price change exceeding limits set by such securities exchange
or market, (b) an imbalance of orders relating to such contracts or
funds, or (c) a disparity in bid and ask quotes relating to such
contracts or funds will constitute a suspension, absence or
material limitation of trading in futures or options contracts or
exchange-traded funds related to the Underlier and (4) a
“suspension, absence or material limitation of trading” on any
relevant exchange or on the primary market on which futures or
options contracts or exchange-traded funds related to the Underlier
are traded will not include any time when such securities market is
itself closed for trading under ordinary circumstances.
Trustee: The Bank of New York Mellon
Calculation Agent: MS & Co.
Issuer Notice To Registered Security Holders, the Trustee and
the Depositary: In the event that the Stated Maturity Date
is postponed due to postponement of the Determination Date, the
Issuer shall give notice of such postponement and, once it has been
determined, of the date to which the Stated Maturity Date has been
rescheduled (i) to each registered holder of the notes by mailing
notice of such postponement by first class mail, postage prepaid,
to such registered holder’s last address as it shall appear upon
the registry books, (ii) to the Trustee by facsimile confirmed by
mailing such notice to the Trustee by first class mail, postage
prepaid, at its New York office and (iii) to The Depository Trust
Company (the “depositary”) by telephone or facsimile, confirmed by
mailing such notice to the depositary by first class mail, postage
prepaid. Any notice that is mailed to a registered holder of the
notes in the manner herein provided shall be conclusively presumed
to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The Issuer shall give
such notice as promptly as possible, and in no case later than (i)
with respect to notice of postponement of the Stated Maturity Date,
the Business Day immediately preceding the scheduled Stated
Maturity Date, and (ii) with respect to notice of the date to which
the Stated Maturity Date has been rescheduled, the Business Day
immediately following the actual Determination Date for determining
the Final Underlier Level.
The Issuer shall, or shall cause the Calculation Agent to, (i)
provide written notice to the Trustee and to the depositary of the
amount of cash, if any, to be delivered with respect to each Face
Amount of notes,
on or prior to 10:30 a.m. (New York City time) on the Business Day
preceding the Stated Maturity Date, and (ii) deliver the aggregate
cash amount due with respect to the notes, if any, to the Trustee
for delivery to the depositary, as holder of the notes, on the
Stated Maturity Date.
CUSIP no.: 61774TXS6
ISIN: US61774TXS67
HYPOTHETICAL
EXAMPLES
The following table and chart
are provided for purposes of illustration only. They should not be
taken as an indication or prediction of future investment results
and are intended merely to illustrate the impact that the various
hypothetical Closing Levels of the Underlier on the Determination
Date could have on the Cash Settlement Amount.
The examples below are based
on a range of Final Underlier Levels that are entirely
hypothetical; no one can predict what the level of the Underlier
will be on any day during the term of the notes, and no one can
predict what the Final Underlier Level will be on the Determination
Date. The Underlier has at times experienced periods of high
volatility — meaning that the level of the Underlier has changed
considerably in relatively short periods — and its performance
cannot be predicted for any future period.
The information in the
following examples reflects hypothetical rates of return on the
notes assuming that they are purchased on the Original Issue Date
at the Face Amount and held to the Stated Maturity Date. The value
of the notes at any time after the Trade Date will vary based on
many economic and market factors, including interest rates, the
volatility of the Underlier, our creditworthiness and changes in
market conditions, and cannot be predicted with accuracy. Any sale
prior to the Stated Maturity Date could result in a substantial
loss to you.
|
Key
Terms and Assumptions |
|
|
Face
Amount: |
$1,000 |
|
Hypothetical
Maximum Settlement Amount: |
$1,114.70 per $1,000 Face Amount of
notes (111.470% of the Face Amount) |
|
Minimum
Cash Settlement Amount: |
None |
|
Threshold
Level: |
82.50% of the Initial Underlier
Level |
|
Buffer
Rate: |
Approximately 121.21% |
|
Threshold
Amount: |
17.50% |
|
·
Neither a market disruption event nor a non-Trading Day occurs
on the Determination Date.
·
No discontinuation of the Underlier or alteration of the method
by which the Underlier is calculated.
·
Notes purchased on the Original Issue Date at the Face Amount
and held to the Stated Maturity Date.
|
Moreover, we have not yet set the Initial Underlier Level that will
serve as the baseline for determining the Underlier Return and the
amount that we will pay on the notes, if any, at maturity. We will
not do so until the Trade Date. As a result, the actual Initial
Underlier Level may differ substantially from the level of the
Underlier at any time prior to the Trade Date.
For these reasons, the
actual performance of the Underlier over the term of the notes, as
well as the Cash Settlement Amount, if any, may bear little
relation to the hypothetical examples shown below or to the
historical levels of the Underlier shown elsewhere in this
document. For information about the historical levels of the
Underlier during recent periods, see “The Underlier” below.
The levels in the left column of the table below represent
hypothetical Final Underlier Levels and are expressed as
percentages of the Initial Underlier Level. The amounts in the
right column represent the hypothetical Cash Settlement Amount,
based on the corresponding hypothetical Final Underlier Level
(expressed as a percentage of the Initial Underlier Level), and are
expressed as percentages of the Face Amount of notes (rounded to
the nearest one-thousandth of a percent). Thus, a hypothetical Cash
Settlement Amount of 100% means that the value of the cash payment
that we would deliver for each $1,000 Face Amount of notes on the
Stated Maturity Date would equal 100% of the Face Amount of notes,
based on the corresponding hypothetical Final Underlier Level
(expressed as a percentage of the Initial Underlier Level) and the
assumptions noted above. The numbers appearing in the table and
chart below may have been rounded for ease of analysis.
| Hypothetical Final
Underlier Level |
Hypothetical Cash
Settlement Amount |
| (as Percentage of Initial
Underlier Level) |
(as Percentage of Face
Amount) |
| 200.000% |
111.470% |
| 175.000% |
111.470% |
| 150.000% |
111.470% |
| 125.000% |
111.470% |
| 120.000% |
111.470% |
| 111.470% |
111.470% |
| 110.000% |
111.470% |
| 105.000% |
111.470% |
| 100.000% |
111.470% |
| 95.000% |
111.470% |
| 90.000% |
111.470% |
| 85.000% |
111.470% |
| 82.500% |
111.470% |
| 80.000% |
96.970% |
| 75.000% |
90.909% |
| 50.000% |
60.606% |
| 25.000% |
30.303% |
| 0.000% |
0.000% |
If, for example, the Final Underlier Level were determined to be
25.000% of the Initial Underlier Level, the Cash Settlement Amount
would be approximately 30.303% of the Face Amount of notes, as
shown in the table above. As a result, if you purchased your notes
on the Original Issue Date at the Face Amount and held them to the
Stated Maturity Date, you would lose approximately 69.697% of your
investment. If you purchased your notes at a premium to the Face
Amount, you would lose a correspondingly higher percentage of your
investment.
If the Final Underlier Level were determined to be 150.000% of the
Initial Underlier Level, the Cash Settlement Amount would be capped
at the Maximum Settlement Amount (expressed as a percentage of the
Face Amount), or 111.470% of each $1,000 Face Amount of notes, as
shown in the table above. As a result, if you purchased the notes
on the Original Issue Date at the Face Amount and held them to the
Stated Maturity Date, you would not benefit from any increase in
the Final Underlier Level above 82.500% of the Initial Underlier
Level.
Payoff Diagram
The following chart shows a graphical illustration of the
hypothetical Cash Settlement Amount (expressed as a percentage of
the Face Amount of notes), if the Final Underlier Level (expressed
as a percentage of the Initial Underlier Level) were any of the
hypothetical levels shown on the horizontal axis. The chart shows
that any hypothetical Final Underlier Level (expressed as a
percentage of the Initial Underlier Level) of less than the
Threshold Level of 82.50% (the section left of the 82.50% marker on
the horizontal axis) would result in a hypothetical Cash Settlement
Amount of less than 100% of the Face Amount of notes (the section
below the 100% marker on the vertical axis), and, accordingly, in a
loss of principal to the holder of the notes. The chart also shows
that any hypothetical Final Underlier Level (expressed as a
percentage of the Initial Underlier Level) of greater than or equal
to 82.50% (the section right of the 82.50% marker on the horizontal
axis) would result in a capped return on your investment and a Cash
Settlement Amount equal to the Maximum Settlement Amount.
|
Hypothetical
Payoff Diagram |
 |
RISK FACTORS
| This section
describes the material risks relating to the notes. For
further discussion of these and other risks, you should read the
section entitled “Risk Factors” in the accompanying product
supplement and prospectus. We also urge you to consult
your investment, legal, tax, accounting and other advisers in
connection with your investment in the notes. |
RISKS RELATING TO AN INVESTMENT IN THE NOTES
The Notes Do Not Pay Interest Or Guarantee The Return Of Any Of
Your Principal
The terms of the notes differ from those of ordinary debt
securities in that the notes do not pay interest and do not
guarantee any return of principal at maturity. If the Final
Underlier Level has declined by an amount greater than the
Threshold Amount of 17.50% from the Initial Underlier Level, you
will receive for each note that you hold a Cash Settlement Amount
that is less than the Face Amount of each note by an amount
proportionate to the decline in the level of the Underlier below
the Threshold Level of 82.50% of the Initial Underlier Level times
the Buffer Rate of approximately 121.21%. As there is no minimum
Cash Settlement Amount on the notes, you could lose your entire
initial investment.
Also, the market price of your notes prior to the Stated Maturity
Date may be significantly lower than the purchase price you pay for
your notes. Consequently, if you sell your notes before the Stated
Maturity Date, you may receive significantly less than the amount
of your investment in the notes.
The Appreciation Potential Of The Notes Is Limited By The
Maximum Settlement Amount
The appreciation potential of the notes is limited by the Maximum
Settlement Amount of $1,114.70
to $1,135.00 per note, or 111.470% to 113.500% of the Face
Amount. The actual Maximum Settlement Amount will be determined on
the Trade Date. Because the Cash Settlement Amount will be limited
to 111.470% to 113.500% of the Face Amount for the notes, any
increase in the Final Underlier Level over the Threshold Level will
not increase the return on the notes, even if the Final Underlier
Level is significantly greater than the Initial Underlier
Level.
The Stated Maturity Date Of The Notes Is A Pricing Term And Will
Be Determined By Us On The Trade Date
We will not fix the Stated Maturity Date until the Trade Date, and
so you will not know the exact term or the Determination Date of
the notes at the time that you make your investment decision. The
term could be as short as approximately 1 year and 5 months, and as
long as approximately 1 year and 8 months. You should be willing to
hold your notes for up to approximately 1 year and 8 months, and
the Stated Maturity Date selected by us could have an impact on the
value of the notes. For example, if the Underlier appreciates, a
note with a shorter term will result in a higher annualized return
based on that appreciation than a note with a longer term. In
addition, the Underlier may be lower on the actual Determination
Date and the Cash Settlement Amount may be lower than if the
Determination Date and Stated Maturity Date had been set
differently in the three-month range.
If You Purchase Your Notes At A Premium To The Face Amount, The
Return On Your Investment Will Be Lower Than The Return On Notes
Purchased At The Face Amount, And The Impact Of Certain Key Terms
Of The Notes Will Be Negatively Affected
The Cash Settlement Amount will not be adjusted based on the issue
price you pay for the notes. If you purchase notes at a price that
differs from the Face Amount of notes, then the return on your
investment in such notes held to the Stated Maturity Date will
differ from, and may be substantially less than, the return on
notes purchased at the Face Amount. If you purchase your notes at a
premium to the Face Amount and hold them to the Stated Maturity
Date, the return on your investment in the notes will be lower than
it would have been had you purchased the notes at the Face Amount
or at a discount to the Face Amount. In addition, the impact of the
Threshold Level and the Maximum Settlement Amount on the return on
your investment will depend upon the price you pay for your notes
relative to the Face Amount. For example, if you purchase your
notes at a premium to the Face Amount, the Threshold Level will not
offer the same measure of protection to your investment as would
have been the case for notes
purchased at the Face Amount or at a discount to the Face Amount.
Additionally, the Cash Settlement Amount will be limited to the
Maximum Settlement Amount, which would represent a lower percentage
return relative to your initial investment than it would have been
had you purchased the notes at the Face Amount.
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 notes in the secondary market and the
price at which MS & Co. may be willing to purchase or sell the
notes in the secondary market, including: the level of the
Underlier, volatility (frequency and magnitude of changes in value)
of the Underlier and dividend yield of the Underlier, interest and
yield rates, time remaining to maturity, geopolitical conditions
and economic, financial, political and regulatory or judicial
events that affect the Underlier or equities markets generally and
which may affect the Final Underlier Level of the Underlier and any
actual or anticipated changes in our credit ratings or credit
spreads. The level of the Underlier may be, and has been, volatile,
and we can give you no assurance that the volatility will lessen.
See “The Underlier” below. You may receive less, and possibly
significantly less, than the Face Amount per note if you try to
sell your notes prior to maturity.
The Notes 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 Notes
You are dependent on our
ability to pay all amounts due on the notes at maturity, and
therefore you are subject to our credit risk. If we default on our
obligations under the notes, your investment would be at risk and
you could lose some or all of your investment. As a result, the
market value of the notes 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 notes.
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 the notes if they
make claims in respect of such notes 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 the notes
should accordingly assume that in any such proceedings they could
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 Notes Is Not Linked To The Level Of
The Underlier At Any Time Other Than The Determination Date
The Final Underlier Level will be based on the Closing Level on the
Determination Date, subject to adjustment for non-Trading Days and
certain market disruption events. Even if the level of the
Underlier appreciates prior to the Determination Date but then
drops by the Determination Date, the Cash Settlement Amount may be
less, and may be significantly less, than it would have been had
the Cash Settlement Amount been linked to the level of the
Underlier prior to such drop. Although the actual level of the
Underlier on the Stated Maturity Date or at other times during the
term of the notes may be higher than the Final Underlier Level, the
Cash Settlement Amount will be based solely on the Closing Level on
the Determination Date.
Investing In The Notes Is Not Equivalent To Investing In The
Underlier
Investing in the notes is not equivalent to investing in the
Underlier or its component stocks. Investors in the notes will not
have voting rights or rights to receive dividends or other
distributions or any other rights with respect to stocks that
constitute the Underlier.
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 Notes In The Original
Issue Price Reduce The Economic Terms Of
The Notes, Cause The Estimated Value Of The Notes To Be Less
Than The Original Issue Price 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 notes in secondary market
transactions will likely be significantly lower than the Original
Issue Price, because secondary market prices will exclude the
issuing, selling, structuring and hedging-related costs that are
included in the Original Issue Price 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 notes, including a fee payable by our affiliate MS
& Co. for the use of the electronic platform of SIMON Markets
LLC, which is a broker-dealer in which an affiliate of Goldman
Sachs & Co. LLC, a dealer participating in the distribution of
the notes, holds an indirect minority equity interest, in the
Original Issue Price and the lower rate we are willing to pay as
issuer make the economic terms of the notes less favorable to you
than they otherwise would be.
However, because the costs associated with issuing, selling,
structuring and hedging the notes 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 notes in the
secondary market, absent changes in market conditions, including
those related to the Underlier, 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 Notes 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 notes than those generated by others, including other
dealers in the market, if they attempted to value the notes. In
addition, the estimated value on the Trade Date does not represent
a minimum or maximum price at which dealers, including MS &
Co., would be willing to purchase your notes in the secondary
market (if any exists) at any time. The value of your notes at any
time after the date hereof 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 Notes Will Not Be Listed On Any Securities Exchange And
Secondary Trading May Be Limited
The notes will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the notes. MS &
Co. may, but is not obligated to, make a market in the notes and,
if it once chooses to make a market, may cease doing so at any
time. When it does make a market, it will generally do so for
transactions of routine secondary market size at prices based on
its estimate of the current value of the notes, taking into account
its bid/offer spread, 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 it will be able to resell the notes. Even if there
is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the notes easily. Since other broker-dealers
may not participate significantly in the secondary market for the
notes, the price at which you may be able to trade your notes is
likely to depend on the price, if any, at which MS & Co. is
willing to transact. If, at any time, MS & Co. were to cease
making a market in the notes, it is likely that there would be no
secondary market for the notes. Accordingly, you should be willing
to hold your notes to maturity.
The Calculation Agent, Which Is A Subsidiary Of Morgan Stanley
And An Affiliate Of MSFL, Will Make Determinations With Respect To
The Notes
As calculation agent, MS & Co. will determine the Initial
Underlier Level and the Final Underlier Level and will calculate
the Cash Settlement Amount you receive at maturity, if any.
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 Final
Underlier Level in the event of a market disruption event or
discontinuance of the Underlier. These potentially subjective
determinations may adversely affect the Cash Settlement Amount at
maturity, if any. For further information regarding these types of
determinations, see “Description of Securities—Postponement of
Valuation Date(s)” and “—Calculation Agent and Calculations” in the
accompanying product supplement. In addition, MS & Co. has
determined the estimated value of the notes on the Trade Date.
Hedging And Trading Activity By Our Affiliates Could Potentially
Adversely Affect The Value Of The Notes
One or more of our affiliates and/or third-party dealers expect to
carry out hedging activities related to the notes (and possibly to
other instruments linked to the Underlier or its component stocks),
including trading in the stocks that constitute the Underlier as
well as in other instruments related to the Underlier. As a result,
these entities may be unwinding or adjusting hedge positions during
the term of the notes, and the hedging strategy may involve greater
and more frequent dynamic adjustments to the hedge as the
Determination Date approaches. Some of our affiliates also trade
the stocks that constitute the Underlier and other financial
instruments related to the Underlier 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 Trade Date could
potentially increase the Initial Underlier Level, and, therefore,
could increase the Threshold Level, which is the level at or above
which the Underlier must close on the Determination Date so that
investors do not suffer a loss on their initial investment in the
notes. Additionally, such hedging or trading activities during the
term of the notes, including on the Determination Date, could
adversely affect the level of the Underlier on the Determination
Date, and, accordingly, the Cash Settlement Amount an investor will
receive at maturity, if any. Furthermore, if the dealer from which
you purchase notes is to conduct trading and hedging activities for
us in connection with the notes, that dealer may profit in
connection with such trading and hedging activities and such
profit, if any, will be in addition to the compensation that the
dealer receives for the sale of the notes to you. You should be
aware that the potential to earn a profit in connection with
hedging activities may create a further incentive for the dealer to
sell the notes to you, in addition to the compensation they would
receive for the sale of the notes.
We May Sell An Additional Aggregate Face Amount Of Notes At A
Different Issue Price
At our sole option, we may decide to sell an additional aggregate
Face Amount of notes subsequent to the date hereof. The issue price
of the notes in the subsequent sale may differ substantially
(higher or lower) from the issue price you paid as provided on the
cover of this document.
The U.S. Federal Income Tax Consequences Of An Investment In The
Notes Are Uncertain
Please read the discussion under “Tax Considerations” in this
document and the discussion under “United States Federal Taxation”
in the accompanying product supplement (together, the “Tax
Disclosure Sections”) concerning the U.S. federal income tax
consequences of an investment in the notes. If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative
treatment, the timing and character of income on the notes might
differ significantly from the tax treatment described in the Tax
Disclosure Sections. There is a risk that the IRS may seek to treat
all or a portion of the gain on the notes as ordinary income. For
example, there is a risk that the IRS could seek to recharacterize
the notes as debt instruments. In that event, U.S. Holders would be
required to accrue into income original issue discount on the notes
every year at a “comparable yield” determined at the time of
issuance and recognize all income and gain in respect of the notes
as ordinary income. The risk that financial instruments providing
for buffers, triggers or similar downside protection features, such
as the notes, would be recharacterized 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 notes, 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 notes, 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 notes, 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
UNDERLIER
The Underlier Reflects The Price Return Of The Stocks Composing
The Underlier, Not A Total Return
The return on the notes is based on the performance of the
Underlier, which reflects the changes in the market prices of the
stocks composing the Underlier. It is not, however, linked to a
“total return” version of the Underlier, which, in addition to
reflecting those price returns, would also reflect all dividends
and other distributions paid on the stocks composing the Underlier.
The return on the notes will not include such a total return
feature.
Adjustments To The Underlier Could Adversely Affect The Value Of
The Notes
The publisher of the Underlier may add, delete or substitute the
stocks constituting the Underlier or make other methodological
changes that could change the level of the Underlier. The publisher
of the Underlier may discontinue or suspend calculation or
publication of the Underlier 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 Underlier
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 Cash Settlement Amount on the notes will be an amount
based on the closing prices at maturity of the securities composing
the Underlier at the time of such discontinuance, without
rebalancing or substitution, computed by the calculation agent in
accordance with the formula for calculating the Underlier last in
effect prior to discontinuance of the Underlier.
Past Performance is No Guide to Future Performance
The actual performance of the Underlier over the term of the notes,
as well as the amount payable at maturity, may bear little relation
to the historical Closing Levels of the Underlier or to the
hypothetical return examples set forth herein. We cannot predict
the future performance of the Underlier.
THE UNDERLIER
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”),
consists of stocks of 500 component companies selected to provide a
performance benchmark for the U.S. equity markets. The calculation
of the S&P 500® Index is based on the relative value
of the float adjusted aggregate market capitalization of the 500
component companies as of a particular time as compared to the
aggregate average market capitalization of 500 similar companies
during the base period of the years 1941 through 1943. For
additional information about the S&P 500® Index, see
the information set forth under “S&P 500® Index” in
the accompanying index supplement.
In addition, information about the Underlier may be obtained from
other sources including, but not limited to, the Underlier
Publisher’s website (including information regarding (i) the
Underlier’s top ten constituents and (ii) the Underlier’s sector
weightings). We are not incorporating by reference into this
document the website or any material it includes. Neither the
issuer nor the agent makes any representation that such publicly
available information regarding the Underlier is accurate or
complete.
Information as of market close on February 1, 2023:
| Bloomberg Ticker Symbol: |
SPX |
| Current Index Value: |
4,119.21 |
| 52 Weeks Ago: |
4,546.54 |
| 52 Week High (on 3/29/2022): |
4,631.60 |
| 52 Week Low (on 10/12/2022): |
3,577.03 |
The following graph sets forth the daily Closing Levels of the
Underlier for each quarter in the period from January 1, 2018
through February 1, 2023. The Closing Level of the Underlier on
February 1, 2023 was 4,119.21. We obtained the information in the
graph below from Bloomberg Financial Markets without independent
verification. The Underlier has at times experienced periods of
high volatility. The actual performance of the Underlier over the
term of the notes, as well as the amount payable at maturity, may
bear little relation to the historical Closing Levels of the
Underlier or to the hypothetical return examples set forth herein.
We cannot predict the future performance of the Underlier. You
should not take the historical levels of the Underlier as an
indication of its future performance, and no assurance can be given
as to the Closing Level of the Underlier on the Determination
Date.
|
S&P 500® Index
Daily Underlier Closing Values
January 1, 2018 to February 1, 2023
|
“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 500® Index” in the
accompanying index supplement.
TAX
CONSIDERATIONS
|
Although there is uncertainty regarding the U.S. federal income tax
consequences of an investment in the notes 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 more likely than not that a note will 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 Trade Date.
Assuming this treatment of the notes is respected and subject to
the discussion in “United States Federal Taxation” in the
accompanying product supplement, 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 notes prior to settlement, other than pursuant to a sale or
exchange.
§ Upon sale,
exchange or settlement of the notes, 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 notes. Such gain or loss
should be long-term capital gain or loss if the investor has held
the notes for more than one year, and short-term capital gain or
loss otherwise.
There is a risk that the Internal Revenue Service (the “IRS”) may
seek to treat all or a portion of the gain on the notes as ordinary
income. For example, there is a risk that the IRS could seek to
recharacterize the notes as debt instruments. In that event, U.S.
Holders would be required to accrue into income original issue
discount on the notes every year at a “comparable yield” determined
at the time of issuance and recognize all income and gain in
respect of the notes as ordinary income.
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 notes, possibly with
retroactive effect.
As discussed in the accompanying product supplement, 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 notes and current market
conditions, we expect that the notes will not have a delta of one
with respect to any Underlying Security on the Trade Date. However,
we will provide an updated determination in the final pricing
supplement. Assuming that the notes do not have a delta of one with
respect to any Underlying Security, our counsel is of the opinion
that the notes 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 notes.
|
|
Both U.S. and non-U.S. investors considering an investment in
the notes should read the discussion under “Risk Factors” in this
document and the discussion under “United States Federal Taxation”
in the accompanying product supplement and consult their tax
advisers regarding all aspects of the U.S. federal income tax
consequences of an investment in the notes, 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.
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, 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 notes.
|
ADDITIONAL INFORMATION ABOUT THE NOTES
No interest or dividends: The notes will not pay interest or
dividends.
No listing: The notes will not be listed on any securities
exchange.
No redemption: The notes will not be subject to any
redemption right.
Purchase at amount other than
Face Amount: The amount we
will pay you on the Stated Maturity Date for your notes will not be
adjusted based on the issue price you pay for your notes, so if you
acquire notes at a premium (or discount) to the Face Amount and
hold them to the Stated Maturity Date, it could affect your
investment in a number of ways. The return on your investment in
such notes will be lower (or higher) than it would have been had
you purchased the notes at the Face Amount. Also, the Threshold
Level would not offer the same measure of protection to your
investment as would be the case if you had purchased the notes at
the Face Amount. Additionally, the Maximum Settlement Amount would
represent a lower (or higher) percentage return than it would have
had you purchased the notes at the Face Amount. See “Risk
Factors—If You Purchase Your Notes At A Premium To The Face Amount,
The Return On Your Investment Will Be Lower Than The Return On
Notes Purchased At The Face Amount, And The Impact Of Certain Key
Terms Of The Notes Will Be Negatively Affected” beginning on page
10 of this document.
Use of proceeds and hedging: The proceeds from the sale of
the notes will be used by us for general corporate purposes. We
will receive, in aggregate, $1,000 per note issued. The costs of
the notes borne by you and described on page 2 comprise the cost of
issuing, structuring and hedging the notes.
On or prior to the Trade Date, we will hedge our anticipated
exposure in connection with the notes, by entering into hedging
transactions with our affiliates and/or third-party dealers. We
expect our hedging counterparties to take positions in stocks of
the Underlier, futures and options contracts on the Underlier, and
any component stocks of the Underlier listed on major securities
markets or positions in any other available securities or
instruments that they may wish to use in connection with such
hedging. Such purchase activity could increase the level of the
Underlier on the Trade Date, and therefore increase the Threshold
Level, which is the level at or above which the Underlier must
close on the Determination Date so that investors do not suffer a
loss on their initial investment in the notes. In addition, through
our affiliates, we are likely to modify our hedge position
throughout the term of the notes, including on the Determination
Date, by purchasing and selling the stocks constituting the
Underlier, futures or options contracts on the Underlier or its
component stocks listed on major securities markets or positions in
any other available securities or instruments that we may wish to
use in connection with such hedging activities. As a result, these
entities may be unwinding or adjusting hedge positions during the
term of the notes, and the hedging strategy may involve greater and
more frequent dynamic adjustments to the hedge as the Determination
Date approaches. We cannot give any assurance that our hedging
activities will not affect the level of the Underlier, and,
therefore, adversely affect the value of the notes or the payment
you will receive at maturity, if any. For further information on
our use of proceeds and hedging, see “Use of Proceeds and Hedging”
in the accompanying product supplement.
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 notes, either directly or indirectly.
Supplemental information regarding plan of distribution;
conflicts of interest: MS & Co., acting as our agent, will
sell all of the notes that it purchases from us to an unaffiliated
dealer at the original issue price of 100.00%, or $1,000 per Face
Amount of notes. Such dealer will sell the notes to investors at
the same price without a discount or commission. MS & Co., the
agent for this offering, is our affiliate. Because MS & Co. is
both our affiliate and a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”), the underwriting arrangements
for this offering must comply with the requirements of FINRA Rule
5121 regarding a FINRA member firm’s distribution of the securities
of an affiliate and related
conflicts of interest. In accordance with FINRA Rule 5121, MS &
Co. may not make sales in offerings of the notes to any of its
discretionary accounts without the prior written approval of the
customer.
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 notes. When MS & Co. prices this offering of notes, it will
determine the economic terms of the notes, including the Maximum
Settlement Amount, such that for each note the estimated value on
the Trade Date will be no lower than the minimum level described in
“Estimated Value” on page 2.
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 notes 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.
Settlement: We expect to deliver the notes against payment
for the notes on the Original Issue Date, which will be the fifth
scheduled Business Day following the Trade Date. Under Rule 15c6-1
of the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in two Business
Days, unless the parties to a trade expressly agree otherwise.
Accordingly, if the Original Issue Date is more than two Business
Days after the Trade Date, purchasers who wish to transact in the
notes more than two Business Days prior to the Original Issue Date
will be required to specify alternative settlement arrangements to
prevent a failed settlement.
WHERE YOU CAN FIND MORE
INFORMATION
MSFL and Morgan Stanley have filed a registration statement
(including a prospectus, as supplemented by the product supplement
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, the index supplement and any
other documents relating to this offering that MSFL and Morgan
Stanley have filed with the SEC for more complete information about
MSFL, Morgan Stanley and this offering. You may get these documents
without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively, MSFL and/or
Morgan Stanley will arrange to send you the product supplement,
index supplement and prospectus if you so request by calling
toll-free 800-584-6837.
You may access these documents on the SEC web site at.www.sec.gov.as follows:
Product Supplement
dated November 16, 2020
Index Supplement dated
November 16, 2020
Prospectus dated
November 16, 2020
Terms used but not defined in this document are defined in the
product supplement, in the index supplement or in the
prospectus.
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