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 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 May 16, 2024
| PROSPECTUS Dated April 12, 2024 |
Pricing Supplement No. 2,270 to |
| PRODUCT SUPPLEMENT Dated November 16, 2023 |
Registration Statement Nos. 333-275587; 333-275587-01 |
| |
Dated , 2024 |
| |
Rule 424(b)(2) |
|
Morgan
Stanley Finance LLC
STRUCTURED
INVESTMENTS
Opportunities
in U.S. Equities |
$
Digital S&P®
Banks Select Industry 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®
Banks Select Industry Index as measured from the trade date to and including the determination date (expected to be between 13
and 15 months after the trade date). If the final underlier level on the determination date is greater than or equal to 85%
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 $1,100.60 and $1,118.00
for each $1,000 face amount of your notes). However, if the underlier declines by more than 15% 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 -15% (the final underlier level is greater than or equal to 85%
of the initial underlier level), the maximum settlement amount of $1,100.60 to $1,118.00 per note, or 110.06% to 111.80% of the face amount
(the actual maximum settlement amount will be determined on the trade date); or |
| ● | if the underlier return is less than -15% (the final underlier level is less than 85% of the initial underlier level), the
sum of (i) $1,000 plus (ii) the product of (a) $1,000 times (b) approximately 1.1765 times
(c) the sum of the underlier return plus 15%. |
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 $977.90
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 |
$10.90 |
$989.10 |
| Total |
$ |
$ |
$ |
(1) Morgan Stanley & Co. LLC (“MS & Co.”) will
sell all of the notes that it purchases from us to an unaffiliated dealer, which will receive a fixed sales commission of 1.09% for each
note they sell. 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 20.
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 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 and prospectus, each of which can be accessed via the hyperlinks below. When you read
the accompanying product supplement, please note that all references in such supplement to the prospectus dated November 16, 2023, or
to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the corresponding sections of
such prospectus, as applicable. Please also see “Terms” on page 3 and “Additional Information About the
Notes” on page 20.
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 April 12, 2024
● Product
Supplement dated November 16, 2023
When you read the accompanying product supplement, please note
that all references in such supplement to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to
the accompanying prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable. 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
$977.90, 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® Banks Select Industry 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 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® Banks Select Industry 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-51 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-58 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 $1,100.60 and $1,118.00 for each $1,000
Face Amount of notes (which is comprised of the $1,000 Face Amount plus an upside payment of between $100.60 and $118.00)
Threshold Level: 85% of the Initial Underlier Level
Threshold Amount: 15%
Buffer Rate: The quotient of the Initial Underlier Level
divided by the Threshold Level, which equals approximately 117.65%
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 13 and 15 months after the Trade Date, subject to postponement as described in the accompanying product supplement on page
S-51 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-40 of the accompanying product supplement.
Business Day: As described under “Description of Securities—Some
Definitions—business day” on page S-39 of the accompanying product supplement.
Trading Day: As described under “Description of Securities—Some
Definitions—index business day” on page S-40 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-41 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.: 61776L5S2
ISIN: US61776L5S28
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: |
$1,100.60 per $1,000 Face Amount of notes (110.060% of the Face Amount) |
| Minimum
Cash Settlement Amount: |
None |
| Threshold
Level: |
85% of the Initial Underlier Level |
| Buffer
Rate: |
Approximately 117.65% |
| Threshold
Amount: |
15% |
|
· 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% |
110.060% |
| 175.000% |
110.060% |
| 150.000% |
110.060% |
| 125.000% |
110.060% |
| 120.000% |
110.060% |
| 115.000% |
110.060% |
| 110.060% |
110.060% |
| 110.000% |
110.060% |
| 105.000% |
110.060% |
| 100.000% |
110.060% |
| 95.000% |
110.060% |
| 90.000% |
110.060% |
| 85.000% |
110.060% |
| 80.000% |
94.118% |
| 75.000% |
88.235% |
| 50.000% |
58.824% |
| 25.000% |
29.412% |
| 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 29.412% 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 70.588% 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 110.060% 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 85.000% 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 85% (the section
left of the 85% 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 85% (the section right of the 85% 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 15% 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 85% of the Initial Underlier Level times the Buffer Rate of approximately 117.65%. 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 $1,100.60 to $1,118.00 per note, or 110.060%
to 111.800% 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 110.060% to 111.800% 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 1 month, and as long as approximately 1 year and 3 months. You should be willing to hold your
notes for up to approximately 1 year and 3 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 two-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. to iCapital 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, for
services it is providing in connection with this offering 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. There
is no direct legal authority regarding the proper U.S. federal tax treatment of the notes, and we do not plan to request a ruling from
the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the notes are
uncertain, and the IRS or a court might not agree with the tax treatment of a note as a single financial contract that is an “open
transaction” for U.S. federal income tax purposes. If the IRS were successful in asserting an alternative treatment of
the notes, the tax consequences of the ownership and disposition of the notes, including the timing and character of income recognized
by U.S. Holders and the withholding tax consequences to Non-U.S. Holders, might be materially and adversely affected. Moreover,
future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal tax treatment of the notes, possibly
retroactively.
Both U.S. and Non-U.S. Holders should consult their tax advisers regarding
the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments, as well as any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
RISKS RELATING
TO THE UNDERLIER
Investing In The Notes Exposes Investors To Risks
Associated With Investments In Securities With A Concentration In The Banking Sector
The stocks included in the Underlier are stocks of companies whose business
is associated with the banking sector. As a result, the value of the notes may be subject to greater volatility and may be more adversely
affected by a single economic, political or regulatory occurrence affecting this industry than a different investment linked to securities
of a more broadly diversified group of issuers or issuers in a less volatile industry. The performance of bank stocks may be affected
by governmental regulation that may, among other things, limit the amount and types of loans and other financial commitments that banks
can make, the interest rates and fees they can charge and the amount of capital they must maintain. Profitability is largely dependent
on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact the banking sector. Banks may also be subject to severe price competition. These
or other factors or the absence of such factors could cause the value of some or all of the component stocks included in the Underlier
to decline during the term of the notes.
The Performance of the S&P®
Banks Select Industry Index Is Likely To Differ from the Performance of the S&P® Total Market Index
Although the Underlier consists of companies drawn from the universe
of companies included in the S&P® Total Market Index, the companies comprising the S&P® Banks Select
Industry Index represent only certain sub-indices as further described below. As a result, the performance of the S&P®
Banks Select Industry Index is likely to differ from the performance of the S&P® Total Market Index because the composition
and weighting of the S&P® Banks Select Industry Index differs markedly from the composition and weighting of the S&P®
Total Market Index. As a result, the return on the notes will not be the same as a debt security with a payment at maturity based on the
performance of the S&P® Total Market Index.
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® Banks Select Industry Index is an equal-weighted
index that is designed to measure the performance of the banks sub-industry portion of the S&P® Total Market Index,
a benchmark that measures the performance of the U.S. equity market. The S&P® Banks Select Industry Index includes
companies in the following sub-industries: asset management and custody banks, diversified banks, regional banks, other diversified financial
services and thrifts and mortgage finance. The S&P® Banks Select Industry Index launched on September 9, 2011. For
additional information about the S&P® Banks Select Industry Index, see the description of the Underlier in “Annex
A: The S&P® Banks Select Industry Index” below.
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 the Underlier’s
top ten constituents). 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 May 15, 2024:
| Bloomberg Ticker Symbol: |
SPSIBK |
| Current Index Value: |
1,056.70 |
| 52 Weeks Ago: |
734.30 |
| 52 Week High (on 5/15/2024): |
1,056.70 |
| 52 Week Low (on 5/16/2023): |
722.18 |
The following graph sets forth the daily Closing Levels of the Underlier
for each quarter in the period from January 1, 2019 through May 15, 2024. The Closing Level of the Underlier on May 15, 2024 was 1,056.70.
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® Banks Select Industry
Index
Daily Underlier Closing Values
January 1, 2019 to May 15, 2024 |
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 reasonable to treat a
note 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. |
We do not plan to
request a ruling from the Internal Revenue Service (the “IRS”) regarding the treatment of the notes. An alternative
characterization of the notes could materially and adversely affect the tax consequences of ownership and disposition of the notes, including
the timing and character of income recognized. In addition, the U.S. Treasury Department and the IRS have requested comments
on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar financial instruments
and have indicated that such transactions may be the subject of future regulations or other guidance. Furthermore, members
of Congress have proposed legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the 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,
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: We expect to agree to sell to MS & Co., and MS & Co. expects to agree to purchase from us, the aggregate
face amount of the offered notes specified on the cover of this pricing supplement. MS & Co. proposes initially to offer the notes
to an unaffiliated securities dealer at the price to public set forth on the cover of this pricing supplement less a concession of 1.09%
of the face amount. 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) 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 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. When you read the accompanying product supplement, please note that all references in such supplement
to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April
12, 2024 or to the corresponding sections of such prospectus, as applicable. You may get these documents without cost by visiting EDGAR
on the SEC web site at.www.sec.gov. Alternatively, MSFL and/or Morgan Stanley will arrange
to send you the product 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, 2023
Prospectus
dated April 12, 2024
Terms used but not defined in this document are defined in the product
supplement or in the prospectus.
ANNEX A
The S&P® Banks Select Industry
Index
We have derived all information contained in this
document regarding the S&P® Banks Select Industry Index, including, without limitation, its make-up, method of calculation
and changes in its components, from publicly available information, without independent verification. This information reflects
the policies of, and is subject to change by, S&P® Dow Jones Indices LLC. S&P® Dow Jones
Indices LLC has no obligation to continue to calculate and publish, and may discontinue calculation and publication of the S&P®
Banks Select Industry Index.
The S&P® Total Market Index
The S&P® Total Market Index
(the “S&P® TM Index”) offers broad market exposure to companies of all market capitalizations, including
all eligible U.S. common equities with a primary listing on the New York Stock Exchange, NYSE Arca, NYSE American, Nasdaq Global Select
Market, Nasdaq Select Market, Nasdaq Capital Market, Cboe BZX, Cboe BYX, Cboe EDGA or Cboe EDGX exchanges. Only U.S. companies are eligible
for inclusion in the S&P® TM Index.
The S&P® Banks Select Industry Index
The S&P® Banks Select Industry
Index is a modified equal-weighted index that is designed to measure the performance of the following GICS® sub-industries
of the S&P® TM Index: asset management and custody banks (must also meet the North American Industry Classification
of depository credit intermediation); diversified banks; regional banks; diversified financial services; and commercial and residential
mortgage finance. The S&P® Banks Select Industry Index launched on September 9, 2011. The S&P® Banks
Select Industry Index is reported by Bloomberg L.P. under the ticker symbol “SPSIBK.”
The Underlier is an S&P® Select Industry Index. For
information about the construction and calculation of the Underlier, please refer to the following rules on the S&P®
Select Industry Indices.
Eligibility Criteria
Membership is based on a company’s GICS® Sub-Industry
classification, as well as liquidity and market capitalization requirements. To be eligible for inclusion in a Select Industry
Index, companies must be in the S&P® TM Index and must be included in a relevant GICS® Sub-Industry. For
purposes of membership in a Select Industry Index, S&P® Dow Jones Indices LLC (“S&P® Dow Jones”)
applies the market capitalization and liquidity inclusion and exclusion criteria separately.
Market Capitalization & Liquidity—Inclusion Criteria. Companies
must have a float-adjusted market capitalization above US$ 2 billion and float-adjusted liquidity ratio, defined as dollar value traded
over the previous 12-months (or such shorter trading period as is available for IPOs or spin-offs that do not have 12 months of trading
history) divided by the float-adjusted market capitalization as of the applicable Select Industry Index rebalancing reference date (“FALR”),
above 100%.
All companies satisfying the above requirements are included in the
Select Industry Index. The total number of companies in each Select Industry Index should be at least 35. If there
are fewer than 35 stocks in a Select Industry Index, stocks from a supplementary list of highly correlated sub-industries, which meet
the market capitalization and liquidity thresholds above, are included in order of their float-adjusted market capitalization to reach
35 constituents. Minimum float-adjusted market capitalization requirements may be relaxed to ensure there are at least 22 companies
in each Select Industry Index as of each rebalancing effective date.
Market Capitalization & Liquidity—Exclusion Criteria. Existing
index constituents are removed at the quarterly rebalancing effective date if their float-adjusted market capitalization falls below US$
1 billion or if their FALR falls below 50%.
Liquidity. An FALR, defined as the annual dollar value traded
divided by the float-adjusted market capitalization, is used to measure liquidity. Using composite pricing and consolidated volume (excluding
dark pools) across all venues (including historical values), annual dollar value traded is defined as the average closing price multiplied
by the historical volume over the 365 calendar days prior to the evaluation date. This is reduced to the available trading period
for initial public offerings or spin-offs that do not have 365 calendar days of trading history. In these cases, the dollar value traded
available as of the evaluation date is annualized. Liquidity requirements are reviewed during the quarterly rebalancings. The price, shares
outstanding and IWF (as defined below) are used to calculate the float-adjusted market capitalization.
Domicile. U.S. companies only.
Takeover Restrictions. At the discretion of S&P®
Dow Jones, constituents with shareholder ownership restrictions defined in company bylaws may be deemed ineligible for inclusion in a
Select Industry Index. Ownership restrictions preventing entities from replicating the index weight of a company may be excluded
from the eligible universe or removed from the applicable Select Industry Index. S&P® Dow Jones will provide up to
five days advance notification of a deletion between rebalancings due to ownership restrictions.
Multiple Share Classes. Some companies in the S&P®
TM Index are represented by multiple share classes. As of December 2015, each company in the Select Industry Indices is represented once
by the primary listing, which is generally the most liquid share line.
Index Construction and Calculation
The Select Industry Indices are equal-weighted, with adjustments to
constituent weights to ensure concentration and liquidity requirements, and calculated by the divisor methodology used by S&P®
Dow Jones for the Select Industry Indices.
The index value of each Select Industry Index is simply the market value
of that Select Industry Index divided by the index divisor:
Index Value = (Index Market Value) / Divisor
where,
Index Market Value = 
Pi × Sharesi ×
IWFi × AWFi
where, N is the number of stocks in the index, Pi
is the price of stock i, Sharesi is total shares outstanding of stock i, IWFi is the float factor
of stock i, and AWFi is the adjustment factor of stock i assigned at each index rebalancing date, t, which
makes all index constituents modified market capitalization equal (and, therefore, equal weight), while maintaining the total market value
of the overall index. The AWF for each index constituent, i, at rebalancing date, t, is calculated by:
AWFi,t = Z / N × FloatAdjustedMarketValuei,t
where, Z is an index specific constant set for the purpose of
deriving the AWF and, therefore, each stock’s share count used in the index calculation (often referred to as modified index shares).
In order to maintain index series continuity, it is also necessary to
adjust the divisor at each rebalancing.
(Index Value) before rebalance = (Index Value) after
rebalance
Therefore,
(Divisor) after rebalance = (Index Market Value) after
rebalance / (Index Value) before rebalance
Float Adjustment. Float adjustment means
that the number of shares outstanding is reduced to exclude closely held shares from the calculation of the index value because such shares
are not available to investors. The goal of float adjustment is to adjust each company’s total shares outstanding for long-term
strategic shareholders, who often have interests such as maintaining control rather than the shorter-term economic fortunes of the company.
Generally, these long-term strategic shareholders include, but are not limited to, officers and directors, private equity, venture capital
and special equity firms, asset managers and insurance companies with direct board of director representation, other publicly traded companies
that hold shares, holders of restricted shares, company-sponsored employee share plans/trusts, defined contribution plans/savings, and
investment plans, foundations or family trusts associated with the company, government entities at all levels (other than government retirement/pension
funds), sovereign wealth funds and any individual person who controls a 5% or greater stake in a company as reported in regulatory filings.
Restricted shares are generally not included in total shares outstanding except for shares held as part of a lock-up agreement. Shares
that are not considered outstanding are also not included in the available float. These generally include treasury stock, stock options,
equity participation units, warrants, preferred stock, convertible stock and rights.
For each component, S&P® Dow
Jones calculates an Investable Weight Factor (“IWF”), which represents the portion of the total shares outstanding
that are considered part of the public float for purposes of the applicable Select Industry Index.
Divisor. Continuity in index values of each Select Industry Index
is maintained by adjusting its divisor for all changes in its constituents’ share capital after its base date. This includes additions
and deletions to the applicable Select Industry Index, rights issues, share buybacks and issuances and non-zero price spin-offs. The value
of each Select Industry Index’s divisor over time is, in effect, a chronological summary of all changes affecting the base capital
of that Select Industry Index. The divisor of each Select Industry Index is adjusted such that the index value of that Select Industry
Index at an instant just prior to a change in base capital equals the index value of that Select Industry Index at an instant immediately
following that change.
Constituent Weightings
At each quarterly rebalancing, companies are initially equally weighted,
with adjustments made to ensure that no individual constituent’s index weight exceeds the value that can be traded in a single day
for a given theoretical portfolio value of US$ 2 billion (the “Theoretical Portfolio Value”). Theoretical Portfolio
Values are determined and reviewed annually by an S&P® Dow Jones’ index committee (the “Index Committee”).
Any updates to Theoretical Portfolio Values are made at the discretion of the Index Committee and announced to the clients with ample
lead time.
S&P® Dow Jones calculates a
maximum basket liquidity weight for each constituent using the ratio of the constituent’s three-month median daily value traded
to the Theoretical Portfolio Value as of the last business day of February, May, August, and November for the rebalancing effective after
the closing on the third Fridays of March, June, September, and December, respectively. Each constituent’s initial equal weight
is compared to the calculated maximum basket liquidity weight, and the constituent’s weight is set to the lesser of the maximum
basket liquidity weight or the initial equal weight.
If the resulting weights fail to sum to 100%, the
weight of the constituent with the lowest maximum basket liquidity weight from the remaining equal weighted constituents is increased
to the maximum basket liquidity weight. The applicable Select Industry Index then equal weights the remaining constituents again. This
process repeats iteratively until no equal weight stock exceeds the assigned maximum basket liquidity weight and the resulting weights
sum to 100%.
If necessary, a final adjustment is made to ensure that no stock in
a Select Industry Index has a weight greater that 4.5%. This step of the iterative weighting process may force the weight of those stocks
limited
to their maximum basket liquidity weight to exceed that weight. In such
cases, S&P® Dow Jones will make no further adjustments. If the Select Industry Index contain exactly 22 stocks as of
the rebalancing effective date, it is equally weighted without basket liquidity constraints.
Index Maintenance
Index membership is reviewed quarterly. Rebalancings occur after the
closing on the third Friday of the quarter ending month. The reference date for additions and deletions is after the closing
of the last trading date of the previous month. For selection purposes, the S&P® Select Industry Index uses
shares outstanding and IWF figures as of the rebalancing effective date. Closing prices as of the second Friday of the last month of the
quarter are used for setting index weights. The Index Committee may change the date of a given rebalancing for reasons including market
holidays occurring on or around the scheduled rebalancing date. Any such change will be announced by S&P® Dow Jones
with proper advance notice where possible.
Timing of Changes
Additions. Companies are added between rebalancings
only if a deletion in the applicable Select Industry Index causes the stock count to fall below 22. In those cases, each stock
deletion is accompanied with a stock addition. The new company will be added to the applicable Select Industry Index at the
weight of the deleted constituent. In the case of mergers involving at least one index constituent, the merged company will
remain in the applicable Select Industry Index if it meets all of the eligibility requirements. If the merged entity qualifies
for inclusion in the applicable Select Industry Index, the stock deemed the target is dropped, the index shares for the acquirer will
remain unchanged, and the weightings of the remaining constituents are adjusted proportionally.
Deletions. A company is deleted from the applicable
Select Industry Index if the S&P® TM Index drops the constituent. If a constituent deletion causes the number of companies
in the relevant index to fall below 22, each stock deletion is accompanied with a stock addition. The weights of all stocks
in that Select Industry Index will proportionately change, due to the absolute change in the number of index constituents. Relative weights
will stay the same. The index divisor will change due to the net change in the market capitalization of that Select Industry Index. In
case of GICS® changes, where a company does not belong to a qualifying sub-industry after the classification change, it
is removed from the applicable Select Industry Index at the next rebalancing.
The table below summarizes the treatment of certain corporate actions.
Type of
Corporate Action |
Adjustment Made to a Select Industry Index |
| Constituent deletion |
If the constituent is a member of a Select Industry Index, it is dropped. |
| Constituent addition |
Only in cases where the deletion causes the component count to fall below 22 stocks, then the deletion is accompanied by an addition assuming the weight of the dropped stock. |
| Change in shares outstanding |
Shares outstanding changes are offset by an AWF. There is no change to the market capitalization of the applicable Select Industry Index and no divisor adjustment. |
| Split/reverse split |
Shares outstanding are adjusted by the split ratio. Stock price is adjusted by the split ratio. There is no change to the market capitalization of the applicable Select Industry Index and no divisor adjustment. |
| Spin-off |
In the case of spin-offs, the Select Industry Indices will follow the S&P® TM Index’s treatment of the action. In general, both the parent company and spin-off companies will remain in the applicable Select Industry Index until the next index rebalancing, regardless of whether they conform to the theme of the applicable Select Industry Index. The spin-off company is added to the applicable Select Industry Index at a zero price at the close of the day before the ex-date. No price adjustment is applied to the parent and there is no divisor change. If the spin-off company is dropped from the S&P® TM Index, the weight of the spun-off company is added back to the parent stock’s weight after at least one day of trading. |
| Change in IWF |
IWF changes are offset by an AWF. There is no change to the market capitalization of the applicable Select Industry Index and no divisor adjustment. |
| Rights offering |
All rights offerings that are in the money on the ex-date are applied under the assumption that the rights are fully subscribed. The stock price is adjusted by the value of the rights and the shares outstanding are increased by the rights ratio. The change in price and shares is offset by an AWF to keep the market capitalization (stock weight) of the applicable Select Industry Index unchanged. There is no change to the market capitalization of that Select Industry Index and no divisor adjustment. |
| Ordinary dividend |
When a company pays an ordinary cash dividend, the relevant Select Industry Index does not make any adjustments to the price or shares of the stock. As a result, there are no divisor adjustments to that Select Industry Index. |
| Special dividends |
The stock price is adjusted by the amount of the dividend. The net change to the market capitalization of the relevant Select Industry Index causes a divisor adjustment. |
If a constituent’s GICS®
classification changes to an ineligible sub-industry for a Select Industry Index, the constituent is removed at the subsequent rebalancing.
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