August 2024
Preliminary Pricing Supplement No.
3,511
Registration Statement Nos. 333-275587;
333-275587-01
Dated August 14, 2024
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in
U.S. Equities
Market Linked
Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at
Risk Securities Linked to the S&P 500® Index due September 5, 2034
Fully and
Unconditionally Guaranteed by Morgan Stanley
§ Linked
to the S&P 500® Index
§ The
securities offered are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed
by Morgan Stanley. The securities will pay no interest, provide for a payment at maturity that may be significantly less than the face
amount and have the terms described in the accompanying product supplement for principal at risk securities, index supplement and prospectus,
as supplemented or modified by this document. At maturity:
§ If
the level of the underlying index has increased, investors will receive the face amount plus a positive return equal to 200% of
the percentage increase in the level of the underlying index from the starting level, subject to a maximum return at maturity of at least
140.50% (to be determined on the pricing date) of the face amount. As a result of the maximum return, the maximum maturity payment amount
will be at least $2,405 per security
§ If
the level of the underlying index has decreased, but the underlying index has not decreased by more than 25%, investors will receive the
face amount
§ If
the underlying index has decreased by more than 25%, investors will have 1-to-1 downside exposure to the decrease in the level of the
underlying index from the starting level, and investors will lose more than 25%, and possibly all, of the face amount
§ Investors
may lose a significant portion, or all, of the face amount of the securities
§ These
long-dated securities are for investors who seek an equity index-based return and who are willing to risk their investment and forgo current
income and upside above the maximum return in exchange for the participation rate that applies to a limited range of performance of the
underlying index
§ The
securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program
§ All
payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment
§ These
securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any securities
included in the underlying index
|
The current estimated value of the securities
is approximately $896.10 per security, or within $16.10 of that estimate. The estimated value of the securities is determined using our
own pricing and valuation models, market inputs and assumptions relating to the underlying index, instruments based on the underlying
index, volatility and other factors including current and expected interest rates, as well as an interest rate related to our secondary
market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market. See
“Estimated Value of the Securities” on page 3.
The securities have complex features and investing
in the securities involves risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning
on page 10. All payments on the securities are subject to our credit risk.
The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts
and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the
related product supplement for principal at risk securities, index supplement and prospectus, each of which can be accessed via the hyperlinks
below. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to
the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12,
2024 or to the corresponding sections of such prospectus, as applicable. Please also see “Additional Information About the Securities”
at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Commissions
and offering price: |
Price
to public |
Agent’s
commissions(1)(2) |
Proceeds
to us(3) |
Per
security |
$1,000 |
$43.70 |
$956.30 |
Total |
$ |
$ |
$ |
| (1) | Wells Fargo
Securities, LLC, an agent for this offering, will receive a commission of up to $43.70 for
each security it sells. Dealers, including Wells Fargo Advisors (“WFA”), may
receive a selling concession of up to $35 per security, and WFA may receive a distribution
expense fee of $1.20 for each security sold by WFA. See “Supplemental information concerning
plan of distribution; conflicts of interest.” |
| (2) | In
respect of certain securities sold in this offering, we may pay a fee of up to $2.50 per
security to selected securities dealers in consideration for marketing and other services
in connection with the distribution of the securities to other securities dealers. |
| (3) | See “Use
of Proceeds and Hedging” in the accompanying product supplement. |
Product Supplement for Principal at Risk Securities dated November 16, 2023 Index Supplement dated November 16, 2023
Prospectus dated April 12, 2024
Morgan Stanley |
Wells
Fargo Securities |
Morgan
Stanley Finance LLC
Market Linked Securities—Leveraged
Upside Participation to a Cap and Contingent Downside
Principal at
Risk Securities Linked to the S&P 500® Index due September 5, 2034
Terms |
Issuer: |
Morgan Stanley Finance LLC |
Guarantor: |
Morgan Stanley |
Maturity
date: |
September 5, 2034†, subject to postponement if the calculation day is postponed* |
Market
measure: |
S&P 500® Index (the “underlying index”) |
Underlying
index publisher: |
S&P Dow Jones Indices LLC, or any successor thereof |
Maturity
payment amount: |
At maturity, the maturity payment amount per $1,000 face amount of
securities will be determined as follows:
· If
the ending level is greater than the starting level:
$1,000 plus the lesser of:
,
and
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324012197/image_002.gif)
· If
the ending level is less than or equal to the starting level, but greater than or equal to the threshold level:
$1,000
· If
the ending level is less than the threshold level:
$1,000 plus
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324012197/image_003.gif)
If the ending level is less than the threshold level, you will
lose more than 25%, and possibly all, of the face amount of your securities at maturity. |
Index
return: |
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324012197/image_001.jpg) |
Participation
rate: |
200% |
Starting
level: |
, which is the closing level of the underlying index on the pricing date |
Ending
level: |
The closing level of the underlying index on the calculation day |
Calculation
day: |
August 30, 2034**† |
Threshold
level: |
, which is 75% of the starting level |
Maximum
return: |
The “maximum return” will be determined on the pricing date and will be at least 140.50% of the face amount per security (at least $1,405.00 per security). As a result of the maximum return, the maximum maturity payment amount will be at least $2,405.00 per security. |
Face
amount: |
$1,000 per security. References in this document to a “security” are to a security with a face amount of $1,000. |
Pricing
date: |
August 30, 2024† |
Original
issue date: |
September 5, 2024† (3 business days after the pricing date) |
CUSIP
/ ISIN: |
61776RJB1 / US61776RJB15 |
Listing: |
The securities will not be listed on any securities exchange. |
Agents: |
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells Fargo Securities, LLC (“WFS”). See “Additional Information About the Securities—Supplemental information regarding plan of distribution; conflicts of interest.” |
†To the extent we make any change to the pricing date or original
issue date, the calculation day and maturity date may also be changed in our discretion to ensure that the term of the securities remains
the same.
* Subject to postponement pursuant to “General Terms of the Securities—Payment
Dates” in the accompanying product supplement for principal at risk securities.
** Subject to postponement pursuant to “General Terms of the
Securities—Consequences of a Market Disruption Event; Postponement of a Calculation Day” in the accompanying product supplement
for principal at risk securities.
|
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Estimated
Value of the Securities |
The face amount of each security is $1,000. This price includes costs
associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently, the estimated value
of the securities on the pricing date will be less than $1,000 per security. We estimate that the value of each security on the pricing
date will be approximately $896.10, or within $16.10 of that estimate. Our estimate of the value of the securities as determined on the
pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying index. The estimated value
of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying index,
instruments based on the underlying index, volatility and other factors including current and expected interest rates, as well as an interest
rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades
in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including the
participation rate, the maximum return and the threshold level, we use an internal funding rate which is likely to be lower than our secondary
market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower
or if the internal funding rate were higher, one or more of the economic terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the pricing
date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the secondary
market, absent changes in market conditions, including those related to the underlying index, may vary from, and be lower than, the estimated
value on the pricing date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer
spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following
the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions,
including those related to the underlying index, and to our secondary market credit spreads, it would do so based on values higher than
the estimated value. We expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the securities
and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
The Principal at Risk Securities Linked to the S&P 500®
Index due September 5, 2034 (the “securities”) can be used:
| § | As an alternative to direct exposure to the underlying index that enhances
returns for any positive performance of the underlying index, subject to the maximum return |
| § | To enhance returns and potentially outperform the underlying index in a moderately
bullish scenario |
| § | To achieve similar levels of upside exposure to the underlying index as a
direct investment, subject to the maximum return |
The securities are not designed for, and may not be an appropriate
investment for, investors who:
| § | Seek a liquid investment or are unable or unwilling to hold the securities
to maturity |
| § | Are unwilling to accept the risk that the ending level of the underlying
index may decrease by more than 25% from the starting level, resulting in a loss of a significant portion or all of the initial investment |
| § | Seek uncapped exposure to the upside performance of the underlying index |
| § | Seek full return of the face amount of the securities at maturity |
| § | Seek current income from their investments |
| § | Seek exposure to the underlying index but are unwilling to accept the risk/return
trade-offs inherent in the payment at maturity for the securities |
| § | Are unwilling to accept our credit risk |
| § | Prefer the lower risk of fixed income investments with comparable maturities
issued by companies with comparable credit ratings |
The considerations identified above are not
exhaustive. Whether or not the securities are an appropriate investment for you will depend on your individual circumstances, and you
should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered
the appropriateness of an investment in the securities in light of your particular circumstances. You should also review carefully the
“Risk Factors” herein and in the accompanying product supplement for risks related to an investment in the securities. For
more information about the underlying index, please see the section titled “S&P 500® Index” below.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Determining
Payment at Maturity |
At maturity, the maturity payment amount per $1,000 face amount of
securities will be determined as follows:
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Payoff Diagram
The payoff diagram below illustrates the maturity payment amount on
the securities based on the following terms:
Face amount: |
$1,000 per security |
Participation rate: |
200% |
Threshold level: |
75% of the starting level |
Hypothetical maximum return: |
140.50% of the face amount ($1,405.00 per security). The actual maximum return will be determined on the pricing date. |
Securities
Payoff Diagram |
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324012197/image_009.jpg) |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Scenario
Analysis and Examples of Maturity Payment Amount at Maturity |
The following scenario analysis
and examples are provided for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible
scenario concerning increases or decreases in the level of the underlying index relative to the starting level. We cannot predict the
ending level on the calculation day. You should not take the scenario analysis and these examples as an indication or assurance of the
expected performance of the underlying index. The numbers appearing in the examples below may have been rounded for ease of analysis.
The following scenario analysis and examples illustrate the payment at maturity on a hypothetical offering of the securities, based on
the following terms*:
Investment term: |
10 years |
|
|
Hypothetical starting level: |
100.00 |
|
|
Threshold level: |
75.00 (75% of the hypothetical starting level) |
|
|
Participation rate: |
200% |
|
|
Hypothetical maximum return: |
140.50% of the face amount ($1,405.00 per security) |
* The hypothetical starting
level of 100.00 has been chosen for illustrative purposes only and does not represent the actual starting level. The actual starting level
and maximum return will be determined on the pricing date and will be set forth under “Terms” above. For historical data regarding
the actual closing levels of the underlying index, see the historical information set forth herein.
Example 1—The level of the underlying
index increases from a starting level of 100.00 to an ending level of 130.00.
Because the hypothetical ending level
is greater than the hypothetical starting level, the maturity payment amount would equal $1,000 plus a positive return equal
to the lesser of:
(i) $1,000
× index return × participation rate
$1,000 × 30% × 200%
= $600.00, and
(ii) the
maximum return of $1,405
On the maturity date, you would receive
the maturity payment amount equal to $1,600.00 per $1,000 face amount of securities, resulting in a total return on the securities
of 60%.
Example 2—The level of the underlying index
increases from a starting level of 100.00 to an ending level of 300.00.
Because the hypothetical ending level is greater than
the hypothetical starting level, the maturity payment amount would equal $1,000 plus a positive return equal to the lesser of:
(i) $1,000
× index return × participation rate
$1,000 × 200% × 200%
= $4,000.00, and
(ii) the
maximum return of $1,405
On the maturity date, you would receive the maturity
payment amount equal to $2,405.00 per $1,000 face amount of securities (which is the maximum maturity payment amount), resulting in a
total return on the securities of 140.50%. The appreciation potential of the securities is limited by the hypothetical maximum return.
Although the participation rate provides 200% exposure to any increase in the ending level over the starting level, because the maturity
payment amount will be limited to 240.50% of the face amount for the securities (assuming a maximum return of $1,405.00) per security),
any increase in the ending level over the starting level by more than 70.25% of the starting level will not further increase the return
on the securities.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Example 3—The level of the underlying
index decreases from a starting level of 100.00 to an ending level of 95.00.
Because the hypothetical ending level is less than
or equal to the hypothetical starting level but greater than or equal to the hypothetical threshold level, the maturity payment amount
would equal:
$1,000
Because the hypothetical ending level
is less than or equal to the hypothetical starting level but greater than or equal to the hypothetical threshold level, you would receive
the maturity payment amount equal to $1,000 per $1,000 face amount of securities, resulting in a total return on the securities
of 0%.
Example 4—The level of the underlying
index decreases from a starting level of 100.00 to an ending level of 50.00.
Because the hypothetical ending level is less than
the hypothetical starting level by more than 25%, you would lose a significant portion of the face amount of your securities and receive
the maturity payment amount equal to:
$1,000 + [$1,000 × (index
return)]
$1,000 + [$1,000 × (-50%)]
= $500.00
Because the ending level is below the threshold level
on the calculation day, the securities will be exposed on a 1-to-1 basis to any decline in the level of the underlying index. Therefore,
the maturity payment amount is equal to $500.00 per $1,000 face amount of securities, resulting in a total loss on the securities of 50%.
If the ending level is below the threshold level
on the calculation day, the securities will be exposed on a 1-to-1 basis to any decline in the level of the underlying index. You may
lose more than 25%, and possibly all, of the face amount of your securities at maturity.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Scenario Analysis
– Hypothetical Maturity Payment Amount for each $1,000 Face Amount of Securities.
Performance
of the Underlying Index* |
Performance
of the Securities(1) |
|
Ending Level |
Percentage
Change from the Starting Level to the Ending Level |
Maturity
Payment Amount |
Return on
Securities(2) |
340.00 |
240.00% |
$2,405.00 |
140.50% |
320.00 |
220.00% |
$2,405.00 |
140.50% |
300.00 |
200.00% |
$2,405.00 |
140.50% |
280.00 |
180.00% |
$2,405.00 |
140.50% |
260.00 |
160.00% |
$2,405.00 |
140.50% |
240.00 |
140.00% |
$2,405.00 |
140.50% |
220.00 |
120.00% |
$2,405.00 |
140.50% |
200.00 |
100.00% |
$2,405.00 |
140.50% |
180.00 |
80.00% |
$2,405.00 |
140.50% |
170.25 |
70.25% |
$2,405.00 |
140.50 |
160.00 |
60.00% |
$2,200.00 |
120.00% |
140.00 |
40.00% |
$1,800.00 |
80.00% |
120.00 |
20.00% |
$1,400.00 |
40.00% |
100.00(3) |
0.00% |
$1,000.00 |
0.00% |
95.00 |
-5.00% |
$1,000.00 |
0.00% |
90.00 |
-10.00% |
$1,000.00 |
0.00% |
80.00 |
-20.00% |
$1,000.00 |
0.00% |
75.00 |
-25.00% |
$1,000.00 |
0.00% |
74.00 |
-26.00% |
$740.00 |
-26.00% |
70.00 |
-30.00% |
$700.00 |
-30.00% |
60.00 |
-40.00% |
$600.00 |
-40.00% |
50.00 |
-50.00% |
$500.00 |
-50.00% |
40.00 |
-60.00% |
$400.00 |
-60.00% |
30.00 |
-70.00% |
$300.00 |
-70.00% |
20.00 |
-80.00% |
$200.00 |
-80.00% |
10.00 |
-90.00% |
$100.00 |
-90.00% |
0.00 |
-100.00% |
$0.00 |
-100.00% |
|
|
|
|
|
*The
underlying index excludes cash dividend payments on stocks included in the underlying index.
| (1) | Assumes a maximum return of 140.50% of the face amount ($1,405.00
per security). |
| (2) | The “Return on Securities” is the number, expressed
as a percentage, which results from comparing the maturity payment amount per $1,000 face amount of securities to the purchase price
of $1,000 per security. |
| (3) | The hypothetical starting level |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
This section describes the material risks relating to the securities.
For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product
supplement for principal at risk securities, index supplement and prospectus. We also urge you to consult your investment, legal, tax,
accounting and other advisers in connection with your investment in the securities.
Risks Relating to an Investment in the Securities
| § | The securities do not pay interest, and you will lose more than 25%, and
possibly all, of the face amount of your securities at maturity if the ending level is less than the threshold level. The terms of
the securities differ from those of ordinary debt securities in that the securities do not pay interest or repay a fixed amount of the
face amount of the securities. If the ending level is less than the threshold level, which is 75% of the starting level, you will lose
more than 25%, and possibly all, of the face amount of your securities at maturity. Investors may lose their entire investment in the
securities. |
| § | The appreciation potential of the securities is limited by the maximum
return. The appreciation potential of the securities is limited by the maximum return. Although the participation rate provides 200%
exposure to any increase in the ending level over the starting level, because any positive return on the securities will be limited to
the maximum return of at least 140.50% of the face amount for the securities, any increase in the ending level over the starting level
by more than at least 70.25% of the starting level, depending on the actual maximum return, will not further increase the return on the
securities. |
| § | The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price
at which MS & Co. or any other dealer may be willing to purchase or sell the securities in the secondary market, including the level,
volatility (frequency and magnitude of changes in level) and dividend yield of the underlying index, interest and yield rates in the market,
time remaining to maturity, geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the
underlying index or equities markets generally and which may affect the ending level of the underlying index and any actual or anticipated
changes in our credit ratings or credit spreads. Generally, the longer the time remaining to maturity, the more the market price of the
securities will be affected by the other factors described above. The level of the underlying index may be, and has recently been, volatile,
and we can give you no assurance that the volatility will lessen. See “S&P 500® Index Overview” below.
You may receive less, and possibly significantly less, than the face amount per security if you try to sell your securities prior to maturity. |
| § | The securities are subject to our credit risk, and any actual or anticipated
changes to our credit ratings or credit spreads may adversely affect the market value of the securities. You are dependent on our
ability to pay all amounts due on the securities at maturity, and therefore you are subject to our credit risk. If we default on our obligations
under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market value
of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated
decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely
affect the market value of the securities. |
| § | As a finance subsidiary, MSFL has no independent operations and will have
no independent assets. As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its
securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect
of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those
available under the related guarantee by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated
obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee.
Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and
should be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities. |
| § | The amount payable on the securities is not linked to the value of the
underlying index at any time other than the calculation day. The ending level will be based on the closing level of the underlying
index on the |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
calculation day, subject to postponement
for non-trading days and certain market disruption events. Even if the level of the underlying index increases prior to the calculation
day but then decreases by the calculation day, the maturity payment amount will be less, and may be significantly less, than it would
have been had the maturity payment amount been linked to the level of the underlying index prior to such decrease. Although the actual
level of the underlying index on the maturity date or at other times during the term of the securities may be higher than the ending level,
the maturity payment amount will be based solely on the closing level of the underlying index on the calculation day.
| § | Investing in the securities is not equivalent to investing in the underlying
index. Investing in the securities is not equivalent to investing in the underlying index or its component stocks. Investors in the
securities will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the stocks
that constitute the underlying index. |
| § | The rate we are willing to pay for securities of this type, maturity and
issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower
rate and the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the face amount reduce the
economic terms of the securities, cause the estimated value of the securities to be less than the face amount and will adversely affect
secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers,
including MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower
than the face amount, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are
included in the face amount and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors. |
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the face amount and the lower rate we are willing to pay as issuer make the economic
terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following
the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions,
including those related to the underlying index, and to our secondary market credit spreads, it would do so based on values higher than
the estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
| § | The estimated value of the securities is determined by reference to our
pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price.
These pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions
about future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities,
our models may yield a higher estimated value of the securities than those generated by others, including other dealers in the market,
if they attempted to value the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum
price at which dealers, including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at
any time. The value of your securities at any time after the date of this document will vary based on many factors that cannot be predicted
with accuracy, including our creditworthiness and changes in market conditions. See also “The market price will be influenced by
many unpredictable factors” above. |
| § | The securities will not be listed on any securities exchange and secondary
trading may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary
market for the securities. MS & Co. and WFS may, but are not obligated to, make a market in the securities and, if either of them
once chooses to make a market, may cease doing so at any time. When they do make a market, they will generally do so for transactions
of routine secondary market size at prices based on their respective estimates of the current value of the securities, taking into account
their respective bid/offer spreads, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding
any related hedging positions, the time remaining to maturity and the likelihood that they will be able to resell the securities. Even
if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers
may not participate significantly in the secondary market for the securities, the price at which you may be able to trade your securities
is likely to depend on |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
the price, if any, at which MS &
Co. or WFS is willing to transact. If, at any time, MS & Co. and WFS were to cease making a market in the securities, it is likely
that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
| § | The calculation agent, which is a subsidiary of Morgan Stanley and an
affiliate of MSFL, will make determinations with respect to the securities. As calculation agent, MS & Co. will determine the
starting level, the threshold level and the ending level and will calculate the amount of cash you receive at maturity, 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 ending level in the event of a market disruption event or discontinuance of the underlying index. These potentially
subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types of
determinations, see “General Terms of the Securities—Market Disruption Events,” “—Adjustments to an Index,”
“—Discontinuance of an Index,” “—Consequences of a Market Disruption Event; Postponement of a Calculation
Day” and “Alternate Exchange Calculation in Case of an Event of Default” in the accompanying product supplement for
principal at risk securities. In addition, MS & Co. has determined the estimated value of the securities on the pricing date. |
| § | Hedging and trading activity by our affiliates could potentially adversely
affect the value of the securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities
related to the securities (and possibly to other instruments linked to the underlying index or its component stocks), including trading
in the stocks that constitute the underlying index as well as in other instruments related to the underlying index. As a result, these
entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater
and more frequent dynamic adjustments to the hedge as the calculation day approaches. Some of our affiliates also trade the stocks that
constitute the underlying index and other financial instruments related to the underlying index on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially affect
the starting level, and, therefore, could increase the level at or above which the underlying index must close on the calculation day
so that investors do not suffer a significant loss on their initial investment in the securities. Additionally, such hedging or trading
activities during the term of the securities, including on the calculation day, could adversely affect the level of the underlying index
on the calculation day, and, accordingly, the amount of cash an investor will receive at maturity, if any. |
| § | The maturity date may be postponed if the calculation day is postponed.
If the scheduled calculation day is not a trading day or if a market disruption event occurs on that day so that the calculation day is
postponed and falls less than three business days prior to the maturity date, the maturity date of the securities will be postponed to
the third business day following that calculation day as postponed. |
| § | Potentially inconsistent research, opinions or recommendations by Morgan
Stanley, MSFL, WFS or our or their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates may publish
research from time to time on financial markets and other matters that may influence the value of the securities, or express opinions
or provide recommendations that are inconsistent with purchasing or holding the securities. Any research, opinions or recommendations
expressed by Morgan Stanley, MSFL, WFS or our or their respective affiliates may not be consistent with each other and may be modified
from time to time without notice. Investors should make their own independent investigation of the merits of investing in the securities
and the underlying index to which the securities are linked. |
| § | The U.S. federal income tax consequences of an investment in the securities
are uncertain. Please read the discussion under “Additional Information About the Securities—Tax considerations”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for principal
at risk securities (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment
in the securities. There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, 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 securities are uncertain, and the IRS or a court might not agree with the tax treatment of a security 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 securities, the tax consequences of the ownership and disposition of the securities, 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, |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
future legislation, Treasury regulations
or IRS guidance could adversely affect the U.S. federal tax treatment of the securities, 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 securities, 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 Underlying Index
| § | Adjustments to the underlying index could adversely affect the value of
the securities. The underlying index publisher may add, delete or substitute the stocks constituting the underlying index or make
other methodological changes that could change the value of the underlying index. The underlying index publisher may discontinue or suspend
calculation or publication of the underlying index at any time. In these circumstances, the calculation agent will have the sole discretion
to substitute a successor index that is comparable to the discontinued underlying index and is permitted to consider indices that are
calculated and published by the calculation agent or any of its affiliates. If the calculation agent
determines that there is no appropriate successor index, the maturity payment amount on the securities will be an amount based on the
closing prices at maturity of the securities composing the underlying index at the time of such discontinuance, without rebalancing or
substitution, computed by the calculation agent in accordance with the formula for calculating the underlying index last in effect prior
to discontinuance of the underlying index. |
| § | Historical levels of the underlying index should not be taken as an indication
of the future performance of the underlying index during the term of the securities. No assurance can be given as to the level of
the underlying index at any time, including on the calculation day, because historical levels of the underlying index do not provide an
indication of future performance of the underlying index. |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
The S&P
500® Index, which is calculated, maintained and published by S&P® Dow Jones Indices LLC (“S&P®”),
is intended to provide a benchmark for performance measurement of the large capitalization segment of the U.S. equity markets by tracking
the stock price movement of 500 companies with large market capitalizations. Component stocks of the S&P 500® Index
are required to have a total company level market capitalization that reflects approximately the 85th percentile of the S&P®
Total Market Index. The S&P 500® Index measures the relative performance of the common stocks of 500 companies as of
a particular time as compared to the performance of the common stocks of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500® Index, see the information set forth under “S&P®
U.S. Indices—S&P 500® Index” in the accompanying index supplement.
The following
graph sets forth the daily closing levels of the underlying index for each quarter in the period from January 1, 2019 through August 9,
2024. The closing level of the underlying index on August 9, 2024 was 5,344.16. We obtained the information in the graph and table
below from Bloomberg Financial Markets without independent verification. The underlying index has at times experienced periods of high
volatility. You should not take the historical levels of the underlying index as an indication of its future performance, and no assurance
can be given as to the closing level of the index on the calculation day.
S&P 500®
Index
Daily Closing Levels
January 1, 2019 to August
9, 2024 |
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324012197/image_010.jpg) |
“Standard & Poor’s®,”
“S&P®,” “S&P 500®,” “Standard & Poor’s 500” and “500”
are trademarks of Standard and Poor’s Financial Services LLC. For more information, see “S&P®
U.S. Indices” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
Additional
Information About the Securities |
Minimum ticketing
size
$1,000 / 1 security
Tax considerations
Although there is uncertainty
regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority, in the opinion
of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, it is reasonable to treat a
security as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. However, because
our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the
pricing date.
Assuming this treatment of
the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product
supplement for principal at risk securities, the following U.S. federal income tax consequences should result based on current law:
| § | A U.S. Holder should not be required to recognize taxable income over the term of the securities prior
to settlement, other than pursuant to a sale or exchange. |
| § | Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal
to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term
capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise. |
We do not plan
to request a ruling from the Internal Revenue Service (the “IRS”) regarding the treatment of the securities. An alternative
characterization of the securities could materially and adversely affect the tax consequences of ownership and disposition of the securities,
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 securities,
possibly with retroactive effect.
As discussed in
the accompanying product supplement for principal at risk securities, Section 871(m) of the Internal Revenue Code of 1986, as amended,
and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate)
withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to
U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section
871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to
an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2027 that do not have a delta of one with respect
to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities will not
have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination in
the final pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security, our counsel
is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend
on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding
is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax
adviser regarding the potential application of Section 871(m) to the securities.
Both U.S. and
non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors” in this document
and the discussion under “United States Federal Taxation” in the accompanying product supplement for principal at risk securities
and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including
possible alternative treatments, and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation to a Cap and Contingent Downside
Principal at Risk Securities Linked to the S&P 500® Index due September 5, 2034
The discussion in the preceding paragraphs under “Tax considerations”
and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement
for principal at risk securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions
with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of an investment in the securities.
Additional considerations
Client accounts over which Morgan Stanley, Morgan
Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities,
either directly or indirectly.
Supplemental information regarding plan of distribution;
conflicts of interest
MS & Co. and WFS will act as the agents for
this offering. WFS will receive a commission of up to $43.70 for each security it sells. WFS proposes to offer the securities in part
directly to the public at the price to public set forth on the cover page of this document and in part to Wells Fargo Advisors (“WFA”)
(the trade name of the retail brokerage business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors
Financial Network, LLC), an affiliate of WFS, or other securities dealers at such price less a selling concession of up to $35 per security.
In addition to the selling concession allowed to WFA, WFS may pay $1.20 per security of the commission to WFA as a distribution expense
fee for each security sold by WFA.
In addition, in respect of certain securities sold
in this offering, we may pay a fee of up to $2.50 per security to selected securities dealers in consideration for marketing and other
services in connection with the distribution of the securities to other securities dealers.
See "Plan of Distribution, Conflicts of Interest"
in the accompanying product supplement for principal at risk securities for information about the distribution arrangements for the securities.
References therein to "agent" refer to each of MS & Co. and WFS, as agents for this offering, except that references to
"agent" in the context of offers to certain Morgan Stanley dealers and compliance with FINRA Rule 5121 do not apply to WFS.
MS & Co., WFS or their affiliates may enter into hedging transactions with us in connection with this offering.
MS & Co. is an affiliate of MSFL and a wholly
owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable,
hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities,
including the maximum return, such that for each security the estimated value on the pricing date will be no lower than the minimum level
described in “Estimated Value of the Securities” beginning on page 3.
MS & Co. will conduct this offering in compliance with the requirements
of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member
firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates
may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use
of Proceeds and Hedging” in the accompanying product supplement for principal at risk securities.
Where you can find more information
Morgan Stanley and MSFL have filed a registration
statement (including a prospectus, as supplemented by the product supplement for principal at risk securities and the index supplement)
with the Securities and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus
in that registration statement, the product supplement for principal at risk securities, the index supplement and any other documents
relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL
and this offering. When you read the accompanying product supplement and index supplement, please note that all references in such supplements
to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April
12, 2024 or to the corresponding sections of such prospectus, as applicable. You may get these documents without cost by visiting EDGAR
on the SEC web site at www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will
arrange to send you the product supplement for principal at risk securities, index supplement and prospectus if you so request by calling
toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site
at www.sec.gov as follows:
Product Supplement for Principal at Risk Securities dated November 16, 2023
Index Supplement dated November 16, 2023
Prospectus dated April 12, 2024
Terms used but not defined in this document are
defined in the product supplement for principal at risk securities, in the index supplement or in the prospectus.
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