Morgan
Stanley Finance
LLC
|
Free
Writing Prospectus relating to Preliminary Terms No. 2,133
Registration
Statement Nos. 333-221595; 333-221595-01
Dated June 10,
2019
Filed pursuant
to Rule 433
|
Structured
Investments
Contingent Income Auto-Callable Securities
due June 30, 2022
All Payments on the Securities Based on the
Worst Performing of the Common Stock of Amazon.com, Inc., the Common Stock of Apple Inc., the Common Stock of Netflix, Inc. and
the Class C Common Stock of Alphabet Inc.
This document provides a summary of the terms of the securities
offered by Morgan Stanley Finance LLC. Investors should review carefully the accompanying preliminary terms, product supplement
and prospectus prior to making an investment decision.
SUMMARY TERMS
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Issuer:
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Morgan Stanley Finance LLC (“MSFL”)
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Guarantor:
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Morgan Stanley
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Underlying stocks:
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Amazon.com, Inc. common stock (the “AMZN Stock”), Apple Inc. common stock (the “AAPL Stock”), Netflix, Inc. common stock (the “NFLX Stock”) and Alphabet Inc. class C common stock (the “GOOG Stock”). For more information about the underlying stocks, see the accompanying preliminary terms.
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Aggregate principal amount:
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$1,000 per security
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Pricing date:
|
June 25, 2019
|
Original issue date:
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June 28, 2019 (3 business days after the pricing date)
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Maturity date:
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June 30, 2022
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Contingent monthly coupon:
|
A
contingent
monthly coupon at an annual rate
of at least 11.00% (corresponding to approximately at least $9.167 per month per security) will be paid on the securities on each
coupon payment date
but only if
the determination closing price of
each underlying stock
is at or above its
respective downside threshold level on the related observation date. The actual contingent monthly coupon rate will be determined
on the pricing date.
If, on any observation date, the determination closing
price of any underlying stock is less than its respective downside threshold level, no contingent monthly coupon will be paid
with respect to that observation date. It is possible that one or more underlying stocks will remain below their respective downside
threshold levels for extended periods of time or even throughout the entire 3-year term of the securities so that you will receive
few or no contingent monthly coupons.
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Payment at maturity:
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If the securities are not redeemed prior to maturity,
investors will receive a payment at maturity determined as follows:
·
If
the final share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level:
(i) the stated principal amount
plus
(ii) the contingent monthly coupon with respect to the final observation date
·
If
the final share price of
any underlying stock
is
less than
its respective downside threshold level: (i) the stated
principal amount
multiplied by
(ii) the share performance factor of the worst performing underlying stock
Under these circumstances, the payment at maturity
will be significantly less than the stated principal amount of $1,000, and will represent a loss of more than 50%, and possibly
all, of your investment.
|
Agent:
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Morgan Stanley & Co. LLC, an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest” in the accompanying preliminary terms. The agent commissions will be as set forth in the final pricing supplement.
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Estimated value on the pricing date:
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Approximately $948.20 per security, or within $22.50 of that estimate. See “Investment Summary” in the accompanying preliminary terms.
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Terms continued on the following page
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Overview
The
securities offered are unsecured obligations of MSFL and are fully and unconditionally guaranteed by Morgan Stanley. The securities
have the terms described in the accompanying preliminary terms, product supplement and prospectus. The securities do not guarantee
the repayment of principal and do not provide for the regular payment of interest. Instead, the securities will pay a contingent
monthly coupon
but only if
the determination closing price of
each of the common stock of Amazon.com, Inc., the common
stock of Apple Inc., the common stock of Netflix, Inc. and the class C common stock of Alphabet Inc.
, which we refer to collectively
as the underlying stocks, is
at or above
50% of its respective initial share price, which we refer to as the respective
downside threshold level, on the related observation date. If, however, the determination closing price of
any underlying stock
is less than its respective downside threshold level on any observation date, we will pay no interest for the related monthly period.
In addition, the securities will be automatically redeemed if the determination closing price of
each underlying stock
is
greater than or equal to
100% of its respective initial share price, which we refer to as the respective call threshold
level, on any quarterly redemption determination date for the early redemption payment equal to the sum of the stated principal
amount plus the related contingent monthly coupon. At maturity, if the securities have not previously been redeemed and the final
share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level, the payment
at maturity will also be the sum of the stated principal amount and the related contingent monthly coupon. However, if the final
share price of
any underlying stock
is
less than
its respective downside threshold level, investors will be exposed
to the decline in the worst performing underlying stock on a 1-to-1 basis and will receive a payment at maturity that is less than
50% of the stated principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must
be willing to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent monthly
coupons throughout the 3-year term of the securities.
The securities are for investors who are willing to risk their principal
and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no monthly interest
over the entire 3-year term and in exchange for the possibility of an automatic early redemption prior to maturity. Because the
payment of contingent monthly coupons is based on the worst performing of the underlying stocks, the fact that the securities are
linked to four underlying stocks does not provide any asset diversification benefits and instead means that a decline of
any
underlying stock below the relevant downside threshold level will result in no contingent monthly coupons, even if one or more
of the other underlying stocks close at or above the respective downside threshold levels. Because all payments on the securities
are based on the worst performing of the underlying stocks, a decline beyond the respective downside threshold level of any underlying
stock will result in no contingent monthly coupon payments and a significant loss of your investment, even if one or more of the
other underlying stocks have appreciated or have not declined as much. Investors will not participate in any appreciation of any
underlying stock. The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program
.
All payments are subject to our credit
risk. If we default on our obligations, you could lose some or all of your investment. These securities are not secured obligations
and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
Investing in the securities involves risks. See
“Selected Risks” on the following page and “Risk Factors” in the accompanying preliminary terms.
You should read this document together with the accompanying
preliminary terms, product supplement and prospectus describing the offering before you decide to invest. You may access the preliminary
terms through the below link:
https://www.sec.gov/Archives/edgar/data/895421/000095010319007860/dp108281_fwp-ps2133.htm
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Terms continued from previous page:
Early redemption:
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If, on any redemption determination date, beginning
on September 25, 2019, the determination closing price of
each underlying stock
is greater than or equal to its respective
call threshold level, the securities will be automatically redeemed for an early redemption payment on the related early redemption
date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any
early redemption date if the determination closing price of any underlying stock is below its respective call threshold level
on the related redemption determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold
plus
(ii) the contingent monthly coupon with respect to the related observation date.
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Redemption determination dates:
|
September 25, 2019, December 26, 2019, March 25, 2020, June 25, 2020, September 25, 2020, December 28, 2020, March 25, 2021, June 25, 2021, September 27, 2021, December 27, 2021 and March 25, 2022, subject to postponement for non-trading days and certain market disruption events.
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Early redemption dates:
|
September 30, 2019, December 31, 2019, March 30, 2020, June 30, 2020, September 30, 2020, December 31, 2020, March 30, 2021, June 30, 2021, September 30, 2021, December 30, 2021 and March 30, 2022, provided that if any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
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Downside threshold level:
|
With respect to the AMZN Stock: 50% of its initial share
price
With respect to the AAPL Stock: 50% of its initial share
price
With respect to the NFLX Stock: 50% of its initial share
price
With respect to the GOOG Stock: 50% of its initial share
price
|
Call threshold level:
|
With respect to the AMZN Stock: 100% of its initial
share price
With respect to the AAPL Stock: 100% of its initial
share price
With respect to the NFLX Stock: 100% of its initial
share price
With respect to the GOOG Stock: 100% of its initial
share price
|
Initial share price:
|
With respect to the AMZN Stock, $ , which is its closing
price on the pricing date
With respect to the AAPL Stock, $ , which is its closing
price on the pricing date
With respect to the NFLX Stock, $ , which is its closing
price on the pricing date
With respect to the GOOG Stock, $ , which is its closing
price on the pricing date
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Final share price:
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With respect to each underlying stock, the closing price of such underlying stock on the final observation date times the adjustment factor on such date
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Worst performing underlying stock:
|
The underlying stock with the largest percentage decrease from the respective initial share price to the respective final share price
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Adjustment factor:
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With respect to each underlying stock, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying stock
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Coupon payment dates:
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Monthly, as set forth under “Observation Dates and Coupon Payment Dates” in the accompanying preliminary terms;
provided
that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
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Observation dates:
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Monthly, as set forth under “Observation Dates and Coupon Payment Dates” in the accompanying preliminary terms, subject, independently in the case of each underlying stock, to postponement for non-trading days and certain market disruption events. We also refer to June 27, 2022 as the final observation date.
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CUSIP / ISIN:
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61769HGU3 / US61769HGU32
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Listing:
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The securities will not be listed on any securities exchange.
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The issuer has filed a registration statement (including a prospectus)
with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that
registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and
this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively,
the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request
it by calling toll-free 1-800-584-6837.
Risk Considerations
The risks set forth below are discussed in more detail in the
“Risk Factors” section in the accompanying preliminary terms. Please review those risk factors carefully prior to making
an investment decision.
|
·
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The securities do not guarantee the return
of any principal.
|
|
·
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The securities do not
provide for the regular payment of interest and may pay no interest over the entire term of the securities.
|
|
·
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You are exposed to the
price risk of all of the underlying stocks, with respect to both the contingent monthly coupons, if any, and the payment at maturity,
if any.
|
|
·
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The contingent coupon, if any, is based only
on the determination closing prices of the underlying stocks on the related monthly observation date at the end of the related
interest period
.
|
|
·
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Investors will not participate in any appreciation
in the price of any underlying stock.
|
|
·
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The market price will
be influenced by many unpredictable factors.
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|
·
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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.
|
|
·
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As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
|
|
·
|
Investing in the securities
is not equivalent to investing in the common stock of Amazon.com, Inc., the common stock of Apple Inc., the common stock of Netflix,
Inc. or the class C common stock of Alphabet Inc.
|
|
·
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No affiliation with Amazon.com, Inc., Apple
Inc., Netflix, Inc. or Alphabet Inc.
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|
·
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We may engage in business with or involving
Amazon.com, Inc., Apple Inc., Netflix, Inc. or Alphabet Inc. without regard to your interests.
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|
·
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The antidilution adjustments the calculation
agent is required to make do not cover every corporate event that could affect the underlying stocks.
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|
·
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The securities will not be listed on any securities
exchange and secondary trading may be limited
, and
accordingly, you should be willing
to hold your securities for the entire 3-year term of the securities.
|
|
·
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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 original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices.
|
|
·
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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.
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|
·
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Hedging and trading activity by our affiliates
could potentially affect the value of the securities.
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|
·
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The calculation agent, which is a subsidiary
of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
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·
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The U.S. federal income tax consequences of
an investment in the securities are uncertain.
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Tax Considerations
You should review carefully the discussion in the accompanying
preliminary terms under the caption “Additional Information About the Securities– Tax considerations” concerning
the U.S. federal income tax consequences of an investment in the securities. However, you should consult your tax adviser regarding
all aspects of the U.S. federal income tax consequences of an investment in the securities, as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity, if
any, assuming the securities are not redeemed prior to maturity. The following examples are for illustrative purposes only. Whether
you receive a contingent monthly coupon will be determined by reference to the determination closing price of each underlying stock
on each monthly observation date, and the amount you will receive at maturity, if any, will be determined by reference to the final
share price of each underlying stock on the final observation date. The actual initial share price, call threshold level and downside
threshold level for each underlying stock will be determined on the pricing date. All payments on the securities, if any, are subject
to our credit risk. The below examples are based on the following terms:
Hypothetical Contingent Monthly Coupon:
|
11.00% per annum (corresponding to approximately $9.167
per month per security)
1
With respect to each coupon payment date, a contingent
monthly coupon is paid but only if the determination closing price of each underlying stock is at or above its respective downside
threshold level on the related observation date.
|
Payment at Maturity (if the securities are not redeemed prior to maturity):
|
If the final share price of
each
underlying stock
is
greater than or equal to
its respective downside threshold level: the stated principal amount and the contingent monthly
coupon with respect to the final observation date
If the final share price of
any
underlying stock
is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the share
performance factor of the worst performing underlying stock
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Share Price:
|
With respect to the AMZN Stock: $1,850.00
With respect to the AAPL Stock: $190.00
With respect to the NFLX Stock: $350.00
With respect to the GOOG Stock: $1,040.00
|
Hypothetical Call Threshold Level:
|
With respect to the AMZN Stock: $1,850.00, which is
100% of its hypothetical initial share price
With respect to the AAPL Stock: $190.00, which is 100%
of its hypothetical initial share price
With respect to the NFLX Stock: $350.00, which is 100%
of its hypothetical initial share price
With respect to the GOOG Stock: $1,040.00, which is
100% of its hypothetical initial share price
|
Hypothetical Downside Threshold Level:
|
With respect to the AMZN Stock: $925.00, which is 50%
of its hypothetical initial share price
With respect to the AAPL Stock: $95.00, which is 50%
of its hypothetical initial share price
With respect to the NFLX Stock: $175.00, which is 50%
of its hypothetical initial share price
With respect to the GOOG Stock: $520.00, which is 50%
of its hypothetical initial share price
|
1
The actual contingent monthly coupon will be an
amount determined by the calculation agent based on the actual contingent monthly coupon rate and the number of days in the applicable
payment period, calculated on a 30/360 day-count basis. The hypothetical contingent monthly coupon of $9.167 is used in these examples
for ease of analysis.
How to determine whether a contingent monthly
coupon is payable with respect to an observation date:
|
Determination Closing Price
|
Hypothetical Contingent Monthly Coupon
|
|
AMZN Stock
|
AAPL Stock
|
NFLX Stock
|
GOOG Stock
|
|
Hypothetical Observation Date 1
|
$1,400.00 (
at or above
its downside threshold level)
|
$150.00 (
at or above
its downside threshold level)
|
$200.00 (
at or above
its downside threshold level)
|
$800.00 (
at or above
its downside threshold level)
|
$9.167
|
Hypothetical Observation Date 2
|
$850.00 (
below
its downside threshold level)
|
$165.00 (
at or above
its downside threshold level)
|
$275.00 (
at or above
its downside threshold level)
|
$875.00 (
at or above
its downside threshold level)
|
$0
|
Hypothetical Observation Date 3
|
$1,350.00 (
at or above
its downside threshold level)
|
$90.00 (
below
its downside threshold level)
|
$100.00 (
below
its downside threshold level)
|
$500.00 (
below
its downside threshold level)
|
$0
|
Hypothetical Observation Date 4
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$800.00 (
below
its downside threshold level)
|
$85.00 (
below
its downside threshold level)
|
$150.00 (
below
its downside threshold level)
|
$450.00 (
below
its downside threshold level)
|
$0
|
On hypothetical observation date 1, each of the underlying stocks
closes at or above its respective downside threshold level. Therefore, a hypothetical contingent monthly coupon of $9.167 is paid
on the relevant coupon payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying stock closes at or above its downside threshold level, but one or more of the other underlying stocks close below their
respective downside threshold level(s). Therefore, no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each of the underlying stocks
closes below its respective downside threshold level, and accordingly no contingent monthly coupon is paid on the relevant coupon
payment date.
You will not receive a contingent monthly coupon on any coupon
payment date if the determination closing price of any underlying stock is below its respective downside threshold level on the
related observation date.
How to calculate the payment at maturity:
In the following examples, one or more underlying stocks close
below the respective call threshold level(s) on each redemption determination date, and, consequently, the securities are not automatically
redeemed prior to, and remain outstanding until, maturity.
|
Final Share Price
|
Payment at Maturity
|
|
AMZN Stock
|
AAPL Stock
|
NFLX Stock
|
GOOG Stock
|
|
Example 1:
|
$2,000.00 (
at or above
its downside threshold level)
|
$300.00 (
at or above
its downside threshold level)
|
$400.00 (
at or above
its downside threshold level)
|
$1,300.00 (
at or above
its downside threshold level)
|
$1,009.167 (the stated principal amount
plus
the contingent monthly coupon with respect to the final observation date)
|
Example 2:
|
$740.00 (
below
its downside threshold level)
|
$275.00 (
at or above
its initial share price)
|
$400.00 (
at or above
its initial share price)
|
$1,200.00 (
at or above
its initial share price)
|
$1,000 x share performance factor of the worst performing underlying stock = $1,000 x ($740.00 / $1,850.00) = $400.00
|
Example 3:
|
$1,350.00 (
at or above
its downside threshold level)
|
$160.00 (
at or above
its downside threshold level)
|
$200.00 (
at or above
its downside threshold level)
|
$312.00 (
below
its downside threshold level)
|
$1,000 x ($312.00 / $1,040.00) = $300.00
|
Example 4:
|
$555.00 (
below
its downside threshold level)
|
$76.00 (
below
its downside threshold level)
|
$140.00 (
below
its downside threshold level)
|
$416.00 (
below
its downside threshold level)
|
$1,000 x ($555.00 / $1,850.00) = $300.00
|
Example 5:
|
$740.00 (
below
its downside threshold level)
|
$57.00 (
below
its downside threshold level)
|
$140.00 (
below
its downside threshold level)
|
$208.00 (
below
its downside threshold level)
|
$1,000 x ($208.00 / $1,040.00) = $200.00
|
In example 1, the final share prices of each of the AMZN Stock,
the AAPL Stock, the NFLX Stock and the GOOG Stock are at or above their respective downside threshold levels. Therefore, investors
receive at maturity the stated principal amount of the securities and the hypothetical contingent monthly coupon with respect to
the final observation date. Investors do not participate in the appreciation of any of the underlying stocks.
In example 2, the final share prices of three underlying stocks
are above their respective initial share prices, but the final share price of the other underlying stock is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying stock at maturity
and receive an amount equal to the stated principal amount
times
the share performance factor of the worst performing underlying
stock.
In example 3, the final share prices of three underlying stocks
are at or above their respective downside threshold levels, but the final share price of the other underlying stock is below its
downside threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying stock
at maturity and receive at maturity an amount equal to the stated principal amount times the share performance factor of the worst
performing underlying stock.
In examples 4 and 5, the final share prices of all of the underlying
stocks are below their respective downside threshold levels, and investors receive at maturity an amount equal to the stated principal
amount
times
the share performance factor of the worst performing underlying stock. In example 4, the AMZN Stock has declined
70% from its initial share price to its final share price, the AAPL Stock has declined 60% from its initial share price to its
final share price, the NFLX Stock has declined 60% from its initial share price to its final share price and the GOOG Stock has
declined 60% from its initial share price to its final share price. Therefore, the payment at maturity equals the stated principal
amount
times
the share performance factor of the AMZN Stock, which represents the worst performing underlying stock in this
example. In example 5, the AMZN Stock has declined 60% from its initial share price to its final share price, the AAPL Stock has
declined 70% from its initial share price to its final share price, the NFLX Stock has declined 60% from its initial share price
to its final share price and the GOOG Stock has declined 80% from its initial share price to its final share price. Therefore the
payment at maturity equals the stated principal amount
times
the share performance factor of the GOOG Stock, which represents
the worst performing underlying stock in this example.
If the final share price of ANY underlying stock is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying stock
at maturity, and your payment at maturity will be less than 50% of the stated principal amount per security and could be zero.
Amazon.com, Inc. Historical Performance
The following graph shows the closing prices of the Amazon.com,
Inc. for each day from January 1, 2014 through June 5, 2019. The historical performance of the AMZN Stock should not be taken as
an indication of its future performance, and no assurance can be given as to the price of the AMZN Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock
of Amazon.com, Inc.
Daily Closing
Prices
January 1,
2014 to June 5, 2019
|
Apple Inc. Historical Performance
The following graph shows the closing prices of the common stock
of Apple Inc. for each day from January 1, 2014 through June 5, 2019. The historical performance of the AAPL Stock should not be
taken as an indication of its future performance, and no assurance can be given as to the price of the AAPL Stock at any time,
including on the redemption determination dates or the observation dates..
Common Stock
of Apple Inc.
Daily Closing
Prices
January 1,
2014 to June 5, 2019
|
Netflix, Inc. Historical Performance
The following graph shows the closing prices of the Netflix,
Inc. for each day from January 1, 2014 through June 5, 2019. The historical performance of the NFLX Stock should not be taken as
an indication of its future performance, and no assurance can be given as to the price of the NFLX Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock
of Netflix, Inc.
Daily Closing
Prices
January 1,
2014 to June 5, 2019
|
Alphabet Inc. Historical Performance
The following graph shows the closing prices of the Alphabet Inc. for each day from March 27, 2014 through June 5, 2019. The historical performance of the GOOG Stock should not be taken as an indication of its future performance, and no assurance can be given as to the price of the GOOG Stock at any time, including on the redemption determination dates or the observation dates.
|
Common Stock
of Alphabet Inc.
Daily Closing
Prices
March 27, 2014
to June 5, 2019
|
**
The
green vertical line indicates October 5, 2015. In the graph, the performance to the left of the green vertical line reflects the
class C capital stock of Google Inc. and the performance to the right of the green vertical line reflects the class C capital stock
of Alphabet Inc.
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