Investment Summary
Buffered Participation Securities
Principal at Risk Securities
The Buffered Participation Securities Based on the Value of the Worst Performing of the S&P 500® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index® due January 10, 2024 (the “Buffered Securities”) offer 100% participation in any positive performance of the worst performing underlying index, subject to the maximum payment at maturity, and can be used:
■To gain exposure to the worst performing of three U.S. equity indices, subject to the maximum payment at maturity
■To obtain a buffer against a specified level of negative performance of the worst performing underlying index
If the final index value of any underlying index is less than 70% of its respective initial index value, investors will be negatively exposed to the decline in the worst performing underlying index beyond the buffer amount and will lose some or a substantial portion of their investment.
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Maturity:
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Approximately 1.25 years
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Participation rate:
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100%
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Maximum payment at maturity:
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At least $1,215 per security (121.50% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
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Minimum payment at maturity:
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$300 per Buffered Security (30% of the stated principal amount). Investors may lose up to 70% of the stated principal amount of the Buffered Securities.
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Buffer amount:
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30%, with 1-to-1 downside exposure to the worst performing underlying index below the buffer
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Coupon:
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None
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Listing:
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The Buffered Securities will not be listed on any securities exchange
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The original issue price of each Buffered Security is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the Buffered Securities, which are borne by you, and, consequently, the estimated value of the Buffered Securities on the pricing date will be less than $1,000. We estimate that the value of each Buffered Security on the pricing date will be approximately $984.00, or within $35.00 of that estimate. Our estimate of the value of the Buffered Securities as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the Buffered Securities on the pricing date, we take into account that the Buffered Securities comprise both a debt component and a performance-based component linked to the underlying indices. The estimated value of the Buffered Securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying indices, instruments based on the underlying indices, 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 Buffered Securities?
In determining the economic terms of the Buffered Securities, including the participation rate, the buffer amount, the maximum payment at maturity and the minimum payment at maturity, 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 Buffered Securities would be more favorable to you.
What is the relationship between the estimated value on the pricing date and the secondary market price of the Buffered Securities?
The price at which MS & Co. purchases the Buffered Securities in the secondary market, absent changes in market conditions, including those related to the underlying indices, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the Buffered Securities are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the Buffered Securities in the secondary market, absent changes in market conditions, including those related to the underlying indices, 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 Buffered Securities, and, if it once chooses to make a market, may cease doing so at any time.