Opportunities in U.S. Equities
Put Warrants Due May 22, 2024 Based on the Value of
the Least-Favorable Performing of the Invesco QQQ TrustSM, Series 1 and the SPDR® S&P 500® ETF
Trust
The put warrants (the “warrants”) are European-style cash-settled
put warrants issued by Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley.
The warrants are based on the inverse performance of the least-favorable performing of the Invesco QQQ TrustSM, Series 1 (the
“QQQ shares”) and the SPDR® S&P 500® ETF Trust (the “SPY shares” and, together
with the QQQ shares, the “underlyings”), meaning that investors in the warrants are taking the view that both underlyings
will decline in value over the term of the warrants, as described below. Accordingly, the payment at maturity on the warrants will be
based on the performance of the least-favorable performing of the QQQ shares and the SPY shares, depending on which underlying has depreciated
the least or appreciated the most and therefore has the lower inverse share percent change. The warrants provide the opportunity to gain
inverse exposure to the performance of the least-favorable performing of the QQQ shares and the SPY shares, as follows: if the final
share price of each underlying is less than 95% of the respective initial share price, which we refer to as the respective strike
price, the warrants will be automatically exercised on the expiration date, and we will pay a cash settlement amount on the cash settlement
date equal to the product of (i) the notional amount and (ii) the inverse share percent change of the least-favorable performing underlying,
subject to the maximum cash settlement amount. If the final share price of either underlying is greater than or equal to the respective
strike price, the warrants will not be exercised and will expire worthless on the expiration date. The warrants may not be exercised
by either you or us prior to the expiration date. The warrants are highly risky and involve risks not associated with an investment
in conventional securities. If the price of each underlying does not decline below the respective strike price, you will lose your entire
investment in the warrants. In addition, even if the price of each underlying has decreased to below the respective strike price, if
the final share price of the least-favorable performing underlying is not sufficiently less than the respective strike price to offset
the warrant premium percentage, you will lose a portion of your initial investment. In order to receive a positive return on your investment,
the final share price of each underlying must be less than the respective strike price by a percentage greater than the warrant premium
percentage. There is no minimum payment on the warrants. Accordingly, you may lose some or all of your initial investment in the warrants.
The warrants are for investors who are willing to risk their invested premium in exchange for the opportunity to gain leveraged returns
for any depreciation of the least-favorable performing underlying beyond the respective strike price when the warrants are automatically
exercised on the expiration date. You will not be able to purchase the warrants unless you have an options-approved brokerage account.
The warrants are issued as part of MSFL’s Series A Global Warrants program.
SUMMARY TERMS |
|
Issuer: |
Morgan Stanley Finance LLC |
Guarantor: |
Morgan Stanley |
Underlyings: |
Invesco QQQ TrustSM, Series 1 (the “QQQ shares”) and SPDR® S&P 500® ETF Trust (the “SPY shares”) |
Aggregate premium amount: |
$ |
Premium amount and original issue price: |
$86.50 per warrant |
Notional amount: |
$1,000 per warrant |
Pricing date: |
May 16, 2022 |
Original issue date: |
May 19, 2022 (3 business days after the pricing date) |
Expiration date: |
May 17, 2024, subject to adjustment for non-trading days and certain market disruption events. |
Cash settlement date: |
May 22, 2024 |
Exercise of warrants; cash settlement amount: |
The warrants will either be automatically exercised or will expire
worthless on the expiration date, as follows:
· if
the final share price of each underlying is less than its respective strike price, the warrants will be automatically exercised
on the expiration date. On the cash settlement date, we will pay with respect to the $86.50 premium amount of each warrant an amount
in cash equal to the product of (x) the notional amount and (y) the inverse share percent change of the least-favorable performing underlying,
subject to the maximum cash settlement amount.
Even if the inverse share percent change of each
underlying is positive (meaning that the final share price of each underlying is less than the respective strike price), if the inverse
share percent change of the least-favorable performing underlying is less than the warrant premium percentage (meaning that the final
share price of the least-favorable performing underlying is not sufficiently less than the respective strike price to offset the warrant
premium percentage), you will receive a cash settlement amount that is less than the premium amount and, therefore, you will lose a portion
of your initial investment in the warrants. In no case will the cash settlement amount be greater than the maximum cash settlement amount
of $300 per warrant.
· if
the final share price of either underlying is greater than or equal to its respective strike price, which is equal to 95% of its
respective initial share price, the warrants will expire worthless and the cash settlement amount will be $0.
The warrants are highly risky, and there is no
minimum payment on the warrants. Accordingly, you will lose all of your initial investment in the warrants if the final share price of
either underlying is greater than or equal to its respective strike price. |
Inverse share percent change: |
With respect to each of the underlyings (strike price – final share price) / initial share price |
Least-favorable performing underlying: |
The underlying with the lower inverse share percent change, meaning the underlying that has appreciated the most or, if both of the underlyings have depreciated, the underlying that has depreciated the least. |
Initial share price: |
With respect to the QQQ shares, $291.84, which is the closing
price of such underlying on May 11, 2022
With respect to the SPY shares, $392.75, which is the closing
price of such underlying on May 11, 2022 |
Final share price: |
With respect to each of the underlyings, the respective closing price on the expiration date times the applicable adjustment factor on such day |
Strike price: |
With respect to the QQQ shares, $277.248, which is 95%
of its initial share price
With respect to the SPY shares, $373.1125, which is 95%
of its initial share price
If the final share price of either underlying is equal
to or greater than the respective strike price, investors will lose all of their investment in the warrants. |
Maximum cash settlement amount: |
$300 per warrant |
Adjustment factor: |
With respect to each underlying, 1.0, subject to adjustment in the event of certain events affecting such underlying |
Warrant premium percentage: |
8.65% |
CUSIP / ISIN: |
61773Y797 / US61773Y7976 |
Listing: |
The warrants will not be listed on any securities exchange. |
Agents: |
Stifel Nicolaus & Co., which will be primarily responsible for managing the offering of the warrants to its clients/investors, and Morgan Stanley & Co. LLC (“MS & Co.”). See “Supplemental information regarding plan of distribution; conflicts of interest.” |
Estimated value on the pricing date: |
Approximately $61.70 per $86.50 premium amount of warrants, or within $2.50 of that estimate. See “Summary of Pricing Supplement” beginning on PS-2. |
Commissions and issue price: |
Price to public |
Agent’s commissions(1) |
Proceeds to us(2) |
Per warrant |
$86.50 |
$5.00 |
$81.50 |
Total |
$ |
$ |
$ |
| (1) | Stifel Nicolaus & Co. will
be primarily responsible for managing the offering of the warrants to its clients/investors pursuant to an agreement with Morgan Stanley
& Co. LLC. See “Description of the Warrants—Supplemental Information Concerning Plan of Distribution; Conflicts of Interest”
in this pricing supplement. For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement. |
| (2) | See “Description of the
Warrants—Use of Proceeds and Hedging” beginning on PS-28. |
You must have an options-approved brokerage account in order to
purchase the warrants and you must be experienced with respect to options and option transactions.
The warrants are highly risky and involve risks not associated with
an investment in conventional securities. If the final share price of either underlying is greater than or equal to the respective strike
price, you will lose all of your investment in the warrants. See “Risk Factors” beginning on PS-10.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these warrants, or determined if this pricing supplement is truthful or complete. Any representation
to the contrary is a criminal offense.
The warrants 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 prospectus
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. You should read the more detailed
description of the warrants in this pricing supplement. In particular, you should review and understand the descriptions in “Summary
of Pricing Supplement” and “Description of the Warrants.”
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.
Prospectus
Supplement dated November 16, 2020 Index Supplement dated November 16, 2020
Prospectus
dated November 16, 2020
SUMMARY
OF PRICING SUPPLEMENT
The following summary describes the warrants
in general terms only. You should read the summary together with the more-detailed information that is contained in the rest of this pricing
supplement and in the accompanying index supplement, prospectus supplement and prospectus. You should carefully consider, among other
things, the matters set forth in “Risk Factors” below.
The Put Warrants Due May 22, 2024 Based on the
Value of the Least-Favorable Performing of the Invesco QQQ TrustSM, Series 1 and the SPDR® S&P 500®
ETF Trust, which we refer to as the warrants, are European-style cash-settled put warrants. The warrants provide the opportunity
to gain inverse exposure to the performance of the least-favorable performing of the QQQ TrustSM, Series 1 and the SPDR®
S&P 500® ETF Trust as follows: if the final share price of each underlying is less than 95% of the initial share
price, which we refer to as the strike price, the warrants will be automatically exercised on the expiration date, and we will pay a cash
settlement amount on the cash settlement date equal to the product of (i) the notional amount and (ii) the inverse share percent change
of the least-favorable performing underlying, subject to the maximum cash settlement amount. If the final share price of either underlying
is equal to or greater than the respective strike price, the warrants will not be exercised and will expire worthless on the expiration
date. The warrants may not be exercised by either you or us prior to the expiration date. The warrants are highly risky and involve
risks not associated with an investment in conventional securities. If the price of each underlying does not decline below the respective
strike price, you will lose your entire investment in the warrants. In addition, even if the price of each underlying has decreased to
below the respective strike price, if the final share price of either underlying is not sufficiently less than the respective strike price
to offset the warrant premium percentage, you will lose a portion of your initial investment. In order to receive a positive return on
your investment, the final share price of each underlying must be less than the respective strike price by a percentage greater than the
warrant premium percentage. There is no minimum payment on the warrants. Accordingly, you may lose some or all of your initial investment
in the warrants. The warrants are for investors who are willing to risk their invested premium in exchange for the opportunity to
gain leveraged returns for any depreciation of the least-favorable performing underlying beyond the respective strike price when the warrants
are automatically exercised on the expiration date. You will not be able to purchase the warrants unless you have an options-approved
brokerage account. All payments are subject to our credit risk.
Each warrant costs $86.50 |
We are offering the Put Warrants Due May 22, 2024 Based on the Inverse Performance of the Least-Favorable Performing of the Invesco QQQ TrustSM, Series 1 and the SPDR® S&P 500® ETF Trust, which we refer to as the warrants. The premium amount and original issue price of each warrant is $86.50. |
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The original issue price includes costs associated with issuing, selling,
structuring and hedging the warrants, which are borne by you, and, consequently, the estimated value of the warrants on the pricing date
will be less than $86.50. We estimate that the value of each warrant on the pricing date will be approximately $61.70, or within $2.50
of that estimate.
Our estimate of the value of the warrants 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?
The estimated value of the warrants is determined using our own pricing
and valuation models, market inputs and assumptions relating to the shares, instruments based on the shares, volatility and other factors
including current and expected interest rates as well as our creditworthiness.
What is the relationship between the estimated value on the pricing
date and the secondary market price of the warrants?
The price at which market participants may purchase the warrants
in the secondary market, absent changes in market conditions, including those related to the underlyings, may vary from, and be lower
than, the estimated value on the pricing date, because the secondary market price takes into account the bid-offer spread that such market
participants 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 warrants are not fully deducted upon issuance, for a |
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period of up to 6 months following the issue date, to the extent that
market participants may buy or sell the warrants in the secondary market, absent changes in market conditions, including those related
to the underlyings, and to our secondary market credit spreads, they would generally 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.
There may not be a secondary market for the warrants, and, if
a secondary market once develops, it may cease to exist at any time. |
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Exercise of the warrants; cash settlement amount |
The warrants are European-style cash-settled put warrants. The warrants
will be automatically exercised or will expire worthless on the expiration date, as follows:
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• if the final share price of the least-favorable performing underlying is less than its respective strike price, the warrants will be automatically exercised on the expiration date. On the cash settlement date, we will pay for each warrant a cash settlement amount equal to: |
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notional amount × inverse share percent change of the least-favorable performing underlying, subject to the maximum cash settlement amount |
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where, |
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notional amount |
= |
$1,000 per warrant |
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inverse share percent change |
= |
strike price
– final share price |
strike price |
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final share price |
= |
With respect to each of the underlyings, the respective
closing price on the expiration date times the applicable adjustment factor on such day. |
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strike price
|
= |
With respect to the QQQ shares, $277.248, which is
95% of its initial share price.
With respect to the SPY shares, $373.1125, which is
95% of its initial share price
If the final share price of either underlying is equal
to or greater than the respective strike price, investors will lose all of their investment in the warrants. |
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maximum cash settlement amount |
= |
$300 per warrant. |
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• if the final share price of either underlying is greater than or equal to the strike price, the warrants will expire worthless and the cash settlement amount will be $0. |
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The warrants may not be exercised by either you or us prior to the expiration date. The warrants are highly risky and involve risks not associated with an investment in conventional securities. If the price of the least-favorable performing underlying does not decline below the respective strike price, you will lose your entire investment in the warrants. In addition, even if the price of the least-favorable performing underlying has decreased to below the respective strike price, if the final share price of the least-favorable performing underlying is not sufficiently less than the strike price to offset the warrant premium percentage, you will lose a portion of your initial investment. In order to receive a positive return on your investment, the final share price of the least-favorable performing underlying must be less than the strike price by a percentage |
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greater than the warrant premium percentage. There is no minimum payment on the warrants. Accordingly, you may lose some or all of your initial investment in the warrants. |
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All payments on the warrants are subject to our credit risk.
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Beginning on PS-5, in the section titled “Hypothetical Payouts
on the Warrants,” we have provided a table and corresponding examples illustrating the calculation of the cash settlement amount
on the warrants at expiration over a range of hypothetical inverse share percent changes for the least-favorable performing underlying,
as determined on the expiration date. The examples do not show every situation that can occur. |
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You can review the historical closing prices of the underlyings in the section of this pricing supplement called “Description of the Warrants—Historical Information” starting on PS-26. You cannot predict the future performance of the underlyings based on the historical performance. |
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Investing in the warrants is not equivalent to investing in, or taking a direct short position in, the underlyings or the component stocks of the share underlying indices. |
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Morgan Stanley & Co. LLC will be the calculation agent |
We have appointed our affiliate, Morgan Stanley & Co. LLC, to act as calculation agent for The Bank of New York Mellon, a New York banking corporation, the warrant agent for the warrants. As calculation agent, MS & Co. will determine the final share price and the inverse share percent change for each underlying and will calculate the payment that you will receive on the cash settlement date, if any. |
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You may revoke your offer to purchase the warrants prior to our acceptance |
We are using this pricing supplement to solicit from you an offer to purchase the warrants. You may revoke your offer to purchase the warrants at any time prior to the time at which we accept such offer by notifying the agent primarily responsible for managing the offering of the warrants. We reserve the right to change the terms of, or reject any offer to purchase, the warrants prior to their issuance. In the event of any material changes to the terms of the warrants, we will notify you. |
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Where you can find more information on the warrants |
The warrants are unsecured warrants issued as part of our Series A global warrants program. You can find a general description of our Series A global warrants program in the accompanying prospectus supplement dated November 16, 2020, the index supplement dated November 16, 2020 and the prospectus dated November 16, 2020. |
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Because this is a summary, it does not contain all of the information that may be important to you. For a detailed description of the terms of the warrants, you should read the “Description of the Warrants” section in this pricing supplement. You should also read about the material risks involved in investing in the warrants in the section called “Risk Factors.” The tax and accounting treatment of investments in shares-linked warrants such as these may differ from that of investments in ordinary debt securities or equities. See the section of this pricing supplement called “Description of the Warrants—United States Federal Taxation.” We urge you to consult with your investment, legal, tax, accounting and other advisers with regard to any proposed or actual investment in the warrants. |
HYPOTHETICAL PAYOUTS ON THE WARRANTS
The following examples and table illustrate
the calculation of the cash settlement amount on the warrants payable at expiration over a range of hypothetical final share prices and
resulting inverse share percent changes, as determined on the expiration date. The hypothetical cash settlement amounts set forth below
are for illustrative purposes only. The actual cash settlement amount payable on the cash settlement date will be determined based on
the performance of the underlyings, as determined on the expiration date. The numbers appearing in the following tables and examples may
have been rounded for ease of analysis.
The examples and table are based on the following
terms:
Term: |
Approximately 2 years |
Notional Amount: |
$1,000 per warrant |
Premium Amount:
Hypothetical Initial Share Price: |
$86.50 per warrant
With respect to the QQQ shares, $280.00
With respect to the SPY shares, $380.00 |
Hypothetical Strike Price: |
With respect to the QQQ shares, $266.00
With respect to the SPY shares, $361.00 |
Warrant Premium Percentage:
Maximum Cash Settlement Amount: |
8.65% per warrant
$300 per warrant |
Exercise of Warrants: |
If the final share price of each underlying
is less than its respective strike price, the warrants will be automatically exercised on the expiration date and you will receive the
cash settlement amount, subject to the maximum cash settlement amount.
If the final share price of either underlying
is equal to or greater than the strike price, the warrants will expire worthless and the cash settlement amount will be zero. |
Example 1: The final share
price of each underlying is less than its respective strike price, but the least-favorable performing underlying depreciates only 10%
from its initial share price, which does not fully offset the warrant premium percentage, and therefore results in a loss of a portion
of your initial investment.
Final share price |
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QQQ: $252 |
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SPY: $304 |
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Inverse share percent change |
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QQQ: ($266
– $252) / $280 = 5% |
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SPY: ($361 – $304) / $380 = 15% |
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Since QQQ is the least-favorable performing
underlying, depreciating 10% from its initial share price, which is below the respective strike price, your warrants
will be automatically exercised, and your payment upon expiration will be calculated as follows: |
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cash settlement amount = notional amount
× inverse share percent change |
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= $1,000 × 5% |
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=
$50 |
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Therefore, on the cash settlement date, you will
receive $50 for each $86.50 warrant (an approximately 42.20% loss). In this example, even though the least-favorable performing underlying
depreciates 10% |
from its initial share price, it does
not depreciate enough to fully offset the warrant premium percentage, and therefore, results in a loss of a portion of your initial investment.
Accordingly, if the inverse share percent change
of the least-favorable performing underlying is positive but less than the warrant premium percentage (meaning that the final share price
is not sufficiently less than the respective strike price to offset the warrant premium percentage), you will receive a cash settlement
amount that is less than the premium amount and, therefore, you will lose a portion of your initial investment in the warrants.
Example 2: The final share
price of each underlying is less than its respective strike price, with the least-favorable performing underlying depreciating 13.65%
from its initial share price, which offsets the warrant premium percentage but does not result in a positive return.
Final share price |
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QQQ: $241.78 |
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SPY: $304 |
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Inverse share percent change |
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QQQ: ($266 –
$241.78) / $280 = 8.65% |
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SPY: ($361 – $304) / $380 = 15% |
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Since QQQ is the least-favorable performing
underlying, depreciating 13.65% below its initial share price, which is below the respective strike price, your warrants
will be automatically exercised, and your payment upon expiration will be calculated as follows: |
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cash settlement amount = notional amount
× inverse share percent change |
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= $1,000 × 8.65% |
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=
$86.50 |
Therefore, on the cash settlement date, you will
receive $86.50 for each $86.50 warrant (a 0.00% total return). In this example, while the least-favorable performing underlying depreciates
13.65% from its initial share price, it depreciates only enough to offset the warrant premium percentage. Therefore, you receive
a 0% return on your initial investment.
Example 3: The final share
price for each underlying is less than its respective strike price, and the least-favorable performing underlying depreciates enough to
result in a positive return upon exercise of the warrants.
Final share price |
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QQQ: $168 |
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SPY: $266 |
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Inverse share percent change |
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QQQ: ($266 –
$168) / $280 = 35% |
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SPY: ($361 – $266) / $380 = 25% |
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Since SPY is the least-favorable performing
underlying, depreciating 30% below its initial share price, which is below the respective strike price, your warrants
will be automatically exercised, and your payment upon expiration will be calculated as follows: |
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cash settlement amount = notional amount
× inverse share percent change |
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= $1,000 × 25% |
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=
$250 |
Therefore, on the cash settlement date, you will receive $250 for each $86.50 warrant (an approximately 189.02% total return). In this example, as the least-favorable performing underlying depreciates 30% from its initial share price, you earn a positive return on your initial investment. |
Example 4: The final share
price of each underlying is less than its respective strike price, and the least-favorable performing underlying depreciates 50% resulting
in a positive return upon exercise of the warrants.
Final share price |
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QQQ: $140 |
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SPY: $171 |
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Inverse share percent change |
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QQQ: ($266 –
$140) / $280 = 45% |
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SPY: ($361 – $171) / $380 = 50% |
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As QQQ is the least-favorable performing
underlying, depreciating 50% below its initial share price, which is below the respective strike price, your warrants
will be automatically exercised, and your payment upon expiration will be calculated as follows: |
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cash settlement amount = notional amount × inverse share percent
change, subject to the maximum cash settlement amount
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= $1,000 × 45%, subject to the maximum
cash settlement amount |
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= $300 |
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Therefore, on the cash settlement date, you will receive $300 for each $86.50 warrant (an approximately 246.82% total return). In this example, as the least-favorable performing underlying depreciates 45% from its initial share price, you earn a positive return on your initial investment, but the cash settlement amount is limited to the maximum cash settlement amount of $300. |
Example 5: The final
share price of each underlying is greater than its respective initial share price, and the least-favorable performing underlying appreciates
15%. The warrants are not exercised and expire worthless.
Final share price |
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QQQ: $308 |
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SPY: $437 |
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Inverse share percent change |
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QQQ: ($266 –
$308) / $280 = -15% |
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SPY: ($361 – $437) / $380 = -20% |
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As SPY is
the least-favorable performing underlying, appreciating 15% above its initial share price, which is also above the respective
strike price, your warrants are not exercised and will expire worthless on the expiration date. Therefore, the loss on
your initial investment in the warrants will be 100% (a total loss of your initial investment). |
Accordingly, if the inverse share percent change
of either underlying is less than 5% (meaning that the final share price of either underlying is equal to or greater than the strike price),
you will lose all of your initial investment in the warrants.
Example 6: The final share
price of one underlying depreciates 20% from its initial share price while the final share price of the other underlying depreciates 3%
from its initial share price. Although both underlyings have depreciated, because the least-favorable performing underlying has not depreciated
by at least 5% from its initial share price, the warrants are not exercised and expire worthless.
Final share price |
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QQQ: $271.60 |
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SPY: $304 |
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Inverse share percent change |
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QQQ: ($266 – $271.60) / $280 = -2% |
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SPY: ($361 – $304) / $380 = 15% |
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Both underlyings
depreciate, but QQQ has depreciated only 3% from its initial share price. As the least-favorable performing underlying has not depreciated
below the strike price, your warrants are not exercised and will expire worthless on the expiration date. Therefore, the loss on your
initial investment in the warrants will be 100% (a total loss of your initial investment).
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Accordingly,
if the inverse share percent change of either underlying is less than 5% (meaning that the final share price of either underlying is
equal to or greater than the strike price), you will lose all of your initial investment in the warrants.
Cash
Settlement Amount on the Expiration Date
Inverse Share Percent Change of Least-Favorable Performing Underlying |
Cash Settlement Amount |
Cash Settlement Amount minus Premium Amount |
Total Return on the Put Warrants |
-60.00% |
$0.00 |
-$86.50 |
-100.00% |
-40.00% |
$0.00 |
-$86.50 |
-100.00% |
-20.00% |
$0.00 |
-$86.50 |
-100.00% |
-10.00% |
$0.00 |
-$86.50 |
-100.00% |
-5.00% |
$0.00 |
-$86.50 |
-100.00% |
0.00% |
$0.00 |
-$86.50 |
-100.00% |
5.00% |
$0.00 |
-$86.50 |
-100.00% |
10.00% |
$50.00 |
-$36.50 |
-42.20% |
12.00% |
$70.00 |
-$16.50 |
-19.08% |
13.65% |
$86.50 |
$0.00 |
0.00% |
15.00% |
$100.00 |
$13.50 |
15.61% |
20.00% |
$150.00 |
$63.50 |
73.41% |
30.00% |
$250.00 |
$163.50 |
189.02% |
35.00% |
$300.00 |
$213.50 |
246.82% |
40.00% |
$300.00* |
$213.50 |
246.82% |
50.00% |
$300.00* |
$213.50 |
246.82% |
*All cash
settlement amounts due upon exercise of the warrants are subject to the maximum cash settlement amount of $300 per warrant.
DESCRIPTION OF THE WARRANTS
Terms used but not defined herein have the meanings given to such terms
in the accompanying prospectus supplement. The term “Warrant” refers to each $86.50 Premium Amount of our Put Warrants Due
May 22, 2024 Based on the Value of the Least-Favorable Performing of the Invesco QQQ TrustSM, Series 1 and the SPDR®
S&P 500® ETF Trust.
Number of Warrants |
|
|
|
|
|
Aggregate Premium Amount |
|
$ |
|
|
|
Aggregate Notional Amount |
|
$ |
|
|
|
Pricing Date |
|
May 16, 2022 |
|
|
|
Original Issue Date (Settlement Date) |
|
May 19, 2022 (expected to be 3 Business Days after the Pricing Date) |
|
|
|
Cash Settlement Date |
|
May 22, 2022, subject to extension as described in the following paragraph. |
|
|
|
|
|
If the Expiration Date is postponed in accordance with the definition thereof so that it falls less than two Business Days prior to the scheduled Cash Settlement Date, the Cash Settlement Date will be postponed to the second Business Day following the Expiration Date as postponed. See “––Expiration Date” below. |
|
|
|
Issue Price |
|
100% ($86.50 per Warrant) |
|
|
|
Premium Amount |
|
$86.50 per Warrant. |
|
|
|
Denominations |
|
$86.50 and integral multiples thereof |
|
|
|
Notional Amount |
|
$1,000 per Warrant |
|
|
|
CUSIP Number |
|
61773Y797 |
|
|
|
ISIN |
|
US61773Y7976 |
|
|
|
Specified Currency |
|
U.S. dollars |
|
|
|
Exercise of Warrants; |
|
|
Cash Settlement Amount |
|
The Warrants will either be automatically exercised or will expire worthless on the Expiration Date, as follows: |
(i) if the Final Share Price of each
Underlying is less than its respective Strike Price, the Warrants will be automatically exercised on the Expiration Date. On the Cash
Settlement Date, we will pay with respect to the $86.50 Premium Amount of each Warrant an amount in cash equal to the product of (x) the
Notional Amount and (y) the Inverse Share Percent Change of the Least-Favorable Performing Underlying, subject to the Maximum Cash Settlement
Amount, or
(ii) if the Final
Share Price of either Underlying is greater than or equal to its respective Strike Price, which is equal to 95% of its respective Initial
Share Price, the Warrants will expire worthless and the Cash Settlement Amount will be $0.
We shall, or shall cause the Calculation
Agent to, (i) provide written notice to the Warrant Agent and to The Depository Trust Company, which we refer to as DTC, of the amount
of cash to be delivered with respect to the $86.50 Premium Amount of each Warrant, on or prior to 10:30 a.m. (New York City time) on the
Business Day preceding the Cash Settlement Date, and (ii) deliver the aggregate cash amount due, if any, with respect to the Warrants
to the Warrant Agent for delivery to DTC, as holder of the Warrants, on or prior to the Cash Settlement Date. We expect such amount of
cash will be distributed to investors on the Cash Settlement Date in accordance with the standard rules and procedures of DTC and its
direct and indirect participants. See “—Book Entry Security or Certificated Security” below, and see “Forms of
Securities—The Depositary” in the accompanying prospectus.
Inverse Share Percent Change |
|
With respect to each Underlying, a fraction, as determined by the Calculation Agent, the numerator of which is the Strike Price minus the Final Share Price and the denominator of which is the Strike Price, as described by the following formula: |
Inverse Share Percent Change |
= |
Strike Price
– Final Share Price |
Strike Price |
Least-Favorable Performing Underlying |
|
The Underlying with the lower Inverse Share Percent Change, meaning the Underlying that has appreciated the most or, if both of the Underlyings have depreciated, the Underlying that has depreciated the least. |
|
|
|
Strike Price |
|
With respect to the QQQ Shares, $277.248, which is 95% of its Initial Share Price |
|
|
|
|
|
With respect to the SPY Shares, $373.1125, which is 95% of its Initial Share Price |
|
|
|
Final Share Price |
|
With respect to each of the Underlyings, the respective Closing Price on the Expiration Date times the applicable Adjustment Factor on such day, as determined by the Calculation Agent. |
|
|
|
Maximum Cash Settlement Amount |
|
$300 per Warrant |
|
|
|
Closing Price |
|
Subject to the provisions set out under “Discontinuance of the Underlyings and/or the Share Underlying Indices; Alteration of Method of Calculation” below, the Closing Price for one share of an Underlying (or one unit of any other security for which a Closing Price must be determined) on any Trading Day means: |
(i) if such Underlying (or any such other
security) is listed on a national securities exchange (other than the Nasdaq), the last reported sale price, regular way, of the principal
trading session on such day on the principal national securities exchange registered under the Securities Exchange Act of 1934, as amended,
on which such Underlying (or any such other security) is listed,
(ii) if such Underlying (or any such
other security) is securities of the Nasdaq, the official closing price of such Underlying published by the Nasdaq on such day, or
(iii) if such Underlying (or any such other security) is
not listed on any national securities exchange but is included in the OTC Bulletin Board Service (the “OTC Bulletin Board”)
operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”), the last reported sale price of the principal trading
session on the OTC Bulletin Board on such day for such Underlying.
If such Underlying (or any such other
security) is listed on any national securities exchange but the last reported sale price or the official closing price published by such
exchange, or by the Nasdaq, as applicable, is not available pursuant to the preceding sentence, then the Closing Price for one share of
such Underlying (or one unit of any such other security) on any Trading Day will mean the last reported sale price of the principal trading
session on the over-the-counter market as reported on the Nasdaq or the OTC Bulletin Board on such day. If a Market Disruption Event (as
defined below) occurs with respect to either of the Underlyings (or any such other security) or the last reported sale price or the official
closing price published by the Nasdaq, as applicable, for such Underlying (or any such other security) is not available pursuant to either
of the two preceding sentences, then the Closing Price for any Trading Day will be the mean, as determined by the Calculation Agent, of
the bid prices for such Underlying (or any such other security) for such Trading Day obtained from as many recognized dealers in such
Underlying, but not exceeding three, as will make such bid prices available to the Calculation Agent. Bids of Morgan Stanley and Co. LLC
and its successors (“MS &Co.”) or any of its affiliates may be included in the calculation of such mean, but only to the
extent that any such bid is the highest of the bids obtained. If no bid prices are provided from any third-party dealers, such Closing
Price will be determined by the Calculation Agent in its sole and absolute discretion (acting in good faith) taking into account any information
that it deems relevant. The term “OTC Bulletin Board Service” will include any successor service thereto, or, if applicable,
the OTC Reporting Facility operated by FINRA. See “Discontinuance of the Underlyings and/or the Share Underlying Indices; Alteration
of Method of Calculation” below.
Underlyings |
|
Invesco QQQ TrustSM, Series 1 (the “QQQ Shares”) and SPDR® S&P 500® ETF Trust (the “SPY Shares”) |
|
|
|
Share Underlying Index |
|
With respect to the QQQ Shares, the NASDAQ-100 Index® |
|
|
|
|
|
With respect to the SPY Shares, the S&P 500® Index |
|
|
|
Share Underlying Index Publisher |
|
With respect to the QQQ Shares, Nasdaq, Inc. or any successor publisher thereof |
|
|
|
|
|
With respect to the SPY Shares, S&P Dow Jones Indices LLC or any successor publisher thereof |
|
|
|
Expiration Date |
|
May 17, 2024, subject to postponement for non-Trading Days or Market Disruption Events as described in the following paragraph. |
If a Market Disruption
Event with respect to either Underlying occurs on the scheduled Expiration Date, or if the Expiration Date
is not a Trading
Day with respect to either Underlying, the Closing Price for such Underlying for such date shall be determined on the immediately succeeding
Trading Day on which no Market Disruption Event shall have occurred with respect to such affected Underlying; provided that the
Final Share Price for any affected Underlying shall not be determined on a date later than the fifth scheduled Trading Day after the scheduled
Expiration Date, and if such date is not a Trading Day or if there is a Market Disruption Event with respect to the affected Underlying
on such date, the Calculation Agent shall determine the Closing Price of such Underlying on such date using the method described in the
third, fourth and fifth sentences of “Closing Price” above.
Adjustment Factor |
|
With respect to each of the Underlyings, 1.0, subject to adjustment in the event of certain events affecting such Underlying. See “Antidilution Adjustments” below. |
|
|
|
Business Day |
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York. |
|
|
|
Trading Day |
|
A day, as determined by the Calculation Agent, on which trading is generally conducted on the New York Stock Exchange, The Nasdaq Stock Market LLC (the “Nasdaq”), the Chicago Mercantile Exchange and the Chicago Board of Options Exchange and in the over-the-counter market for equity securities in the United States. |
|
|
|
Relevant Exchange |
|
With respect to each of the Underlyings, the primary exchange or market of trading for any security (or any combination thereof) then included in the Share Underlying Index for such Underlying or any Successor Index (as defined below). |
|
|
|
Antidilution Adjustments |
|
The Adjustment Factor with respect to each of the Underlyings shall be adjusted as follows: |
If such Underlying is subject to a
stock split or reverse stock split, then once such split has become effective, the Adjustment Factor for such Underlying shall be adjusted
by the Calculation Agent to equal the product of the prior Adjustment Factor and the number of shares issued in such stock split or reverse
stock split with respect to one share of such Underlying.
No adjustment to an Adjustment Factor
pursuant to the paragraph above shall be required unless such adjustment would require a change of at least 0.1% in the amount being adjusted
as then in effect. Any number so adjusted shall be rounded to the nearest one hundred-thousandth with five one-millionths being rounded
upward.
The Calculation Agent shall be solely
responsible for the determination and calculation of any adjustments to the Adjustment Factors or method of calculating the Adjustment
Factors and of any related determinations, and its determinations and calculations with respect thereto shall be conclusive in the absence
of manifest error.
Book Entry Security
or
Certificated Security |
|
Book Entry. The Warrants will be issued in the form of one or more fully registered global warrants, which will be deposited with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be the only registered holder of the Warrants. Your beneficial interest in the Warrants will be evidenced solely by entries on the books of the Warrants intermediary acting on your behalf as a direct or indirect participant in DTC. In this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices to you will mean payments or notices to DTC, as the registered holder of the Warrants, for distribution to participants in accordance with DTC’s procedures. For more information regarding DTC and book-entry warrants, please read “Forms of Securities—The Depositary,” “Securities Offered on a Global Basis Through the Depositary—Book-Entry, Delivery and Form” and “Securities Offered on a Global Basis Through the Depositary—Global Clearance and Settlement Procedures” in the accompanying prospectus. |
|
|
|
Warrant Agent |
|
The Bank of New York Mellon, a New York banking corporation |
|
|
|
Agents |
|
Stifel Nicolaus & Co., which will be primarily responsible for managing the offering of the Warrants to its clients/investors, and Morgan Stanley & Co. LLC (“MS & Co.”) |
|
|
|
Calculation Agent |
|
MS & Co. and its successors. |
All determinations made by the Calculation
Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes
and binding on you, the Warrant Agent and us.
All calculations with respect to the
Cash Settlement Amount, if any, will be made by the Calculation Agent and will be rounded to the nearest one hundred-thousandth, with
five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the amount
of cash payable per Warrant, if any, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g.,
.76545 would be rounded up to .7655); and all dollar amounts paid, if any, on the aggregate number of Warrants will be rounded to the
nearest cent, with one-half cent rounded upward.
Because the Calculation Agent is our
affiliate, the economic interests of the Calculation Agent and its affiliates may be adverse to your interests as an investor in the Warrants,
including with respect to certain determinations and judgments that the Calculation Agent must make in determining the Final Share Price.
See “—Discontinuance of the Underlyings and/or the Share Underlying Indices; Alteration of Method of Calculation” below.
MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment.
Market Disruption Event |
|
Market Disruption Event means, with respect to each of the Underlyings: |
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of such Underlying on the primary market for such Underlying for more than two hours of trading or during the one-half
hour period preceding the close of the principal trading session in such market; or a breakdown or failure in the price and trade reporting
systems of the primary market for such Underlying as a result of which the reported trading prices for such Underlying during the last
one-half hour preceding the close of the principal trading session in such market are materially inaccurate; or the suspension, absence
or material limitation of trading on the primary market for trading in futures or options contracts related to such Underlying, if available,
during the one-half hour period preceding the close of the principal trading session in the applicable market, in each case as determined
by the Calculation Agent in its sole discretion, or
(b) a suspension, absence or material limitation of trading
of stocks then constituting 20 percent or more of the value of the Share Underlying Index for such Underlying on the Relevant Exchange(s)
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(s), in each case as determined by the Calculation Agent in its sole discretion, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts related to the Share Underlying
Index for such Underlying 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 Warrants.
For the purpose of determining whether
a Market Disruption Event exists at any time, if trading in a security included in the Share Underlying Index for an Underlying is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the level of the Share Underlying
Index for such Underlying will be based on a comparison of (x) the portion of the level of the Share Underlying Index for such Underlying
attributable to that security relative to (y) the overall level of the Share Underlying Index for such Underlying, in each case immediately
before that suspension or limitation.
For the purpose of determining whether
a Market Disruption Event has occurred with respect to an Underlying: (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 futures or options contract related to the Share Underlying Index
for an Underlying or an Underlying will not constitute a Market Disruption Event, (3) a suspension of trading in futures or options contracts
on the Share Underlying Index for an Underlying or an Underlying by the primary securities market trading in such contracts 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 (c) a disparity in bid and ask quotes relating to such contracts will constitute a suspension, absence or material limitation of trading
in futures or options contracts related to the Share Underlying Index for an Underlying or an Underlying 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
related to the Share Underlying Index for an Underlying or an Underlying are traded will not include any time when such securities market
is itself closed for trading under ordinary circumstances.
Discontinuance of the Underlyings |
|
|
and/or the Share Underlying Indices; |
|
|
Alteration of Method of Calculation |
|
If trading in an Underlying on every applicable national securities exchange, on the OTC Bulletin Board and in the over-the-counter market is permanently discontinued or the exchange-traded fund related to such Underlying is liquidated or otherwise terminated (a “Discontinuance or Liquidation Event”), the Closing Price of such Underlying on any Trading Day following the Discontinuance or Liquidation Event will be determined by the Calculation Agent and will be deemed to equal the product of (i) the closing value of the Share Underlying Index for such Underlying (or any Successor Index, as described below) on such date (taking into account any material changes in the method of calculating the Share Underlying Index following such Discontinuance or Liquidation Event) and (ii) a fraction, the numerator of which is the Closing Price of such Underlying and the denominator of which is the closing value of the Share Underlying Index for such Underlying (or any Successor Index, as described below), each determined as of the last day prior to the occurrence of the Discontinuance or Liquidation Event on which a Closing Price was available. |
If, subsequent to a Discontinuance
or Liquidation Event, the relevant Share Underlying Index Publisher discontinues publication of the Share Underlying Index for such Underlying
and the relevant Share Underlying Index Publisher or another entity (including MS & Co.) publishes a successor or substitute index
that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued the Share Underlying Index for such
Underlying (such index being referred to herein as a “Successor Index”), then any subsequent Closing Price for such Underlying
on any Trading Day following a Discontinuance or Liquidation Event will be determined by reference to the published value of such Successor
Index at the regular weekday
close of trading on such Trading Day,
and, to the extent the value of the Successor Index differs from the value of the Share Underlying Index for such Underlying at the time
of such substitution, proportionate adjustments shall be made by the Calculation Agent for purposes of calculating payments on the Warrants.
Upon any selection by the Calculation
Agent of a Successor Index, the Calculation Agent will cause written notice thereof to be furnished to the Warrant Agent, to us and to
DTC, as holder of the Warrants, within three Business Days of such selection. We expect that such notice will be made available to you,
as a beneficial owner of the Warrants, in accordance with the standard rules and procedures of DTC and its direct and indirect participants.
If, subsequent to a Discontinuance
or Liquidation Event, the relevant Share Underlying Index Publisher discontinues publication of the Share Underlying Index for such Underlying
prior to, and such discontinuance is continuing on, any relevant date of calculation, and the Calculation Agent determines, in its sole
discretion, that no Successor Index is available at such time, then the Calculation Agent will determine the Closing Price for such Underlying
for such date. Such Closing Price will be computed by the Calculation Agent in accordance with the formula for and method of calculating
the Share Underlying Index for such Underlying last in effect prior to such discontinuance, using the Closing Price (or, if trading in
the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have
prevailed but for such suspension or limitation) at the close of the principal trading session of the Relevant Exchange on such date of
each security most recently composing the Share Underlying Index for such Underlying without any rebalancing or substitution of such securities
following such discontinuance.
The Invesco QQQ TrustSM, Series 1; Public |
|
|
Information |
|
The Invesco QQQ TrustSM, Series 1, is an exchange-traded fund managed by Invesco Capital Management LLC, which seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the NASDAQ-100 Index®. Effective June 4, 2018, the name of the fund was changed from PowerShares QQQ TrustSM, Series 1, to its current name, and effective on or about June 4, 2018, the name of the sponsor of the Invesco QQQ TrustSM, Series 1, was changed to Invesco Capital Management LLC. Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by the Invesco QQQ TrustSM, Series 1, pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-61001 and 811-08947, respectively, through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly available sources. Neither the issuer nor any Agent makes any representation that any such publicly available information regarding the Invesco QQQ TrustSM, Series 1, is accurate or complete. |
This document relates only to the
Warrants offered hereby and does not relate to the QQQ Shares. We have derived all disclosures contained in this document regarding the
Invesco QQQ TrustSM, Series 1, from the publicly available documents described above. In connection with the offering of the
securities, neither we nor any Agent has participated in the preparation of such documents or made any due diligence inquiry with respect
to the Invesco QQQ TrustSM, Series 1. Neither we nor any Agent makes any representation that such publicly available documents
or any other publicly available information regarding the Invesco QQQ TrustSM, Series 1, is accurate or complete. Furthermore,
we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the trading price of the QQQ Shares (and therefore the price of
the QQQ Shares at the time we price the Warrants) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning the Invesco QQQ TrustSM, Series 1, could affect the value received
with respect to the Warrants and therefore the value of the Warrants.
Neither the issuer nor any of its
affiliates makes any representation to you as to the performance of the QQQ Shares.
We and/or our affiliates may presently
or from time to time engage in business with the Invesco QQQ TrustSM, Series 1. In the course of such business, we and/or our
affiliates may acquire non-public information with respect to the Invesco QQQ TrustSM, Series 1, and neither we nor any of
our affiliates undertakes to disclose any such information to you. In addition, one or more of our affiliates may publish research reports
with respect to the QQQ Shares. The statements in the preceding two sentences are not intended to affect the rights of investors in the
securities under the securities laws. As a prospective purchaser of the Warrants, you should undertake an independent investigation of
the Invesco QQQ TrustSM, Series 1, as in your judgment is appropriate to make an informed decision with respect to an investment
linked to the QQQ Shares.
The NASDAQ-100 Index® |
|
The NASDAQ-100 Index®, which is calculated, maintained and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index includes companies across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index equals the aggregate value of the then-current NASDAQ-100 Index share weights of each of the NASDAQ-100 Index component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index component security, multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index |
value. The NASDAQ-100
Index® is described in “NASDAQ-100 Index®” in the accompanying index supplement.
The SPDR® S&P 500® ETF Trust; Public |
|
|
Information |
|
The SPDR® S&P 500® ETF Trust (formerly SPDR Trust, Series 1), or SPY, formed by PDR Services LLC, is a unit investment trust registered under the Investment Company Act of 1940 that holds a portfolio of securities consisting of substantially all of the common stocks, in substantially the same weighting, as the S&P 500® Index. SPY seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P 500® Index. The SPDR® S&P 500® ETF Trust is managed by State Street Global Advisors Trust Company (“SSGA”), a registered investment company that consists of numerous separate investment portfolios, including the SPDR® S&P 500® ETF Trust. Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by SSGA pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 033-46080 and 811-06125, respectively, through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly available sources. Neither the issuer nor any Agent makes any representation that any such publicly available information regarding the SPDR® S&P 500® ETF Trust, is accurate or complete. |
This document relates only to the
Warrants offered hereby and does not relate to the SPY Shares. We have derived all disclosures contained in this document regarding the
SPDR® S&P 500® ETF Trust from the publicly available documents described above. In connection with the
offering of the securities, neither we nor any Agent has participated in the preparation of such documents or made any due diligence inquiry
with respect to the SPDR® S&P 500® ETF Trust. Neither we nor any Agent makes any representation that
such publicly available documents or any other publicly available information regarding the SPDR® S&P 500®
ETF Trust is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading
price of the SPY Shares (and therefore the price of the SPY Shares at the time we price the Warrants) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose material future events concerning the SPDR® S&P
500® ETF Trust could affect the value received with respect to the Warrants and therefore the value of the Warrants.
Neither the issuer nor any of its
affiliates makes any representation to you as to the performance of the SPY Shares.
We and/or our affiliates may presently
or from time to time engage in business with the SPDR® S&P 500® ETF Trust. In the course of such business,
we and/or our affiliates may acquire non-
public information with respect to
the SPDR® S&P 500® ETF Trust, and neither we nor any of our affiliates undertakes to disclose any such
information to you. In addition, one or more of our affiliates may publish research reports with respect to the SPY Shares. The statements
in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As a prospective
purchaser of the Warrants, you should undertake an independent investigation of the SPDR® S&P 500® ETF
Trust as in your judgment is appropriate to make an informed decision with respect to an investment linked to the SPY Shares.
The S&P 500® Index |
|
The S&P 500® Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through 1943. For additional information about the S&P 500® Index, see the information set forth under “S&P 500® Index” in the accompanying index supplement. |
|
|
|
Historical Information |
|
The following tables set forth the published high and low Closing Prices, as well as end-of-quarter Closing Prices, of each of the Underlyings for each quarter in the period from January 1, 2017 through May 11, 2022. The Closing Price of the QQQ Shares on May 11, 2022 was $291.84. The Closing Price of the SPY Shares on May 11, 2022 was $392.75. The graphs following the tables set forth the historical performance of each of the Underlyings for each day during the same period. We obtained the information in the tables below from Bloomberg Financial Markets, without independent verification. |
The historical Closing Prices of
the Underlyings should not be taken as an indication of future performance, and no assurance can be given as to the Closing Price with
respect to either Underlying on the Expiration Date. The Final Share Price with respect to either Underlying may be at or above the respective
Strike Price so that the Warrants expire worthless on the Expiration Date.
We cannot give you any assurance
that the Inverse Share Percent Change of the Least-Favorable Performing Underlying will be greater than the Warrant Premium Percentage
so that you will not lose money on your investment, or that it will be positive so that you will not lose your entire investment in the
Warrants.
Invesco QQQ TrustSM, Series 1 |
High
($) |
Low
($) |
Period
End ($) |
2017 |
|
|
|
First Quarter |
132.47 |
119.54 |
132.38 |
Second Quarter |
143.57 |
130.40 |
137.64 |
Third Quarter |
146.42 |
136.19 |
145.45 |
Fourth Quarter |
158.64 |
145.58 |
155.76 |
2018 |
|
|
|
First Quarter |
174.08 |
153.45 |
160.13 |
Second Quarter |
177.60 |
155.51 |
171.65 |
Invesco QQQ TrustSM, Series 1 |
High
($) |
Low
($) |
Period
End ($) |
Third Quarter |
186.74 |
170.80 |
185.79 |
Fourth Quarter |
186.17 |
143.50 |
154.26 |
2019 |
|
|
|
First Quarter |
182.57 |
149.82 |
179.66 |
Second Quarter |
191.11 |
170.12 |
186.74 |
Third Quarter |
195.29 |
180.73 |
188.81 |
Fourth Quarter |
213.79 |
184.05 |
212.61 |
2020 |
|
|
|
First Quarter |
236.98 |
169.30 |
190.40 |
Second Quarter |
248.84 |
182.31 |
247.60 |
Third Quarter |
302.76 |
250.49 |
277.84 |
Fourth Quarter |
313.74 |
269.38 |
313.74 |
2021 |
|
|
|
First Quarter |
336.45 |
299.94 |
319.13 |
Second Quarter |
354.99 |
316.89 |
354.43 |
Third Quarter |
382.11 |
354.57 |
357.96 |
Fourth Quarter |
403.99 |
352.62 |
397.85 |
2022 |
|
|
|
First Quarter |
401.68 |
318.17 |
362.54 |
Second Quarter (through May 11, 2022) |
369.30 |
291.84 |
291.84 |
SPDR® S&P 500® ETF Trust |
High
($) |
Low
($) |
Period
End ($) |
2017 |
|
|
|
First Quarter |
239.78 |
225.24 |
235.74 |
Second Quarter |
244.66 |
232.51 |
241.80 |
Third Quarter |
251.23 |
240.55 |
251.23 |
Fourth Quarter |
268.20 |
252.32 |
266.86 |
2018 |
|
|
|
First Quarter |
286.58 |
257.63 |
263.15 |
Second Quarter |
278.92 |
257.47 |
271.28 |
Third Quarter |
293.58 |
270.90 |
290.72 |
Fourth Quarter |
291.73 |
234.34 |
249.92 |
2019 |
|
|
|
First Quarter |
284.73 |
244.21 |
282.48 |
Second Quarter |
295.86 |
274.57 |
293.00 |
Third Quarter |
302.01 |
283.82 |
296.77 |
Fourth Quarter |
322.94 |
288.06 |
321.86 |
2020 |
|
|
|
First Quarter |
338.34 |
222.95 |
257.75 |
Second Quarter |
323.20 |
246.15 |
308.36 |
Third Quarter |
357.70 |
310.52 |
334.89 |
Fourth Quarter |
373.88 |
326.54 |
373.88 |
2021 |
|
|
|
First Quarter |
397.26 |
368.79 |
396.33 |
Second Quarter |
428.06 |
400.61 |
428.06 |
Third Quarter |
453.19 |
424.97 |
429.14 |
Fourth Quarter |
477.48 |
428.64 |
474.96 |
2022 |
|
|
|
First Quarter |
477.71 |
416.25 |
451.64 |
Second Quarter (through May 11, 2022) |
456.80 |
392.75 |
392.75 |
Historical Daily Closing Prices
of the Invesco QQQ TrustSM, Series 1
January 1, 2017 through May 11,
2022
Historical Daily Closing Prices
of the SPDR® S&P 500® ETF Trust
January 1, 2017 through May 11,
2022
Use of Proceeds and Hedging |
|
The proceeds from the sale of the Warrants will be used by us for general corporate purposes. We will receive, in aggregate, $86.50 per Warrant issued, because, when we enter into hedging transactions in order to meet our obligations under the Warrants, our hedging counterparty will reimburse the cost of the Agents’ commissions. The costs of the Warrants borne by you and described beginning on PS-2 above comprise the Agents’ commissions and the cost of issuing, structuring and hedging the Warrants. See also “Use of Proceeds” in the accompanying prospectus. |
On or prior to May 11, 2022, we expect
to hedge our anticipated exposure in connection with the Warrants by entering into hedging transactions with our affiliates and/or third-party
dealers. We expect our hedging counterparties to take positions in the Underlyings, in futures and/or options contracts on the Underlyings
or any component stocks of the Share Underlying Indices 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 potentially increase the Initial Share Price of one or both of the underlyings, and, as a result, increase the
Strike Price at or above which such underlying must close on the expiration date in order for you to not suffer a loss on your initial
investment in the warrants (depending also on the performance of the other Underlying). These entities may be unwinding or adjusting hedge
positions during the term of the Warrants, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge
as the Expiration Date approaches. We cannot give any assurance that our hedging activities will not affect the value of either of the
Underlyings, and, therefore, adversely affect the value of the Warrants or the payment you will receive on the Cash Settlement Date, if
any (depending also on the performance of the other underlying).
Governing Law |
|
The Warrants are governed by, and construed in accordance with, the laws of the State of New York. |
In the event MSFL or Morgan Stanley becomes subject to
a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together,
the “U.S. Special Resolution Regimes”), the transfer of the Warrants, the Warrant Agreement and the related Morgan
Stanley guarantee (together, the “Relevant Agreements”), and any interest and obligation in or under the Relevant Agreements,
from MSFL or Morgan Stanley, respectively, will be effective to the same extent as the transfer would be effective under such U.S. Special
Resolution Regime if the Relevant Agreements, and any interest and obligation in or under the Relevant Agreements, were governed by the
laws of the United States or a state of the United States. In the event MSFL or Morgan Stanley, or any of their affiliates, becomes subject
to a U.S. Special Resolution Regime, default rights against MSFL or Morgan Stanley with respect to the Relevant Agreements are permitted
to be exercised to no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if the Relevant
Agreements were governed by the laws of the United States or a state of the United States.
Supplemental Information Concerning |
|
|
Plan of Distribution; Conflicts of Interest |
|
Stifel Nicolaus & Co. will be primarily responsible for managing the offering of the Warrants to its clients/investors pursuant to a an agreement with Morgan Stanley & Co. LLC. Morgan Stanley & Co. LLC, one of the Agents for this offering, is an affiliate of the issuer. 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. |
When we price this offering of Warrants,
we will determine the economic terms of the Warrants such that for each Warrant the estimated value on the Pricing Date will be no lower
than the level described in “Summary of Pricing Supplement” beginning on PS-2.
United States Federal Taxation |
|
Our counsel, Davis Polk & Wardwell LLP, is unable to render a definitive opinion on the tax treatment of the Warrants at this time as such opinion is dependent in part upon market conditions on the pricing date. Our counsel’s opinion will therefore be provided only on the pricing date. However, under current law, and based on current market conditions, our counsel believes that it is at least reasonable to treat each Warrant as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. |
Assuming this treatment of the Warrants
is respected, a U.S. Holder should not be required to recognize taxable income over the term of the Warrants prior to settlement, other
than pursuant to a sale or exchange. Any gain or loss recognized upon sale, exchange, lapse or settlement of the Warrants should generally
be long-term capital gain or loss if the U.S. Holder has held the Warrants for more than one year at such time, and short-term capital
gain or loss otherwise. For a detailed discussion of the U.S. federal income tax consequences to U.S. Holders of the ownership and disposition
of the Warrants, U.S. Holders should read the sections of the accompanying prospectus supplement entitled “United States Federal
Taxation—Tax Consequences to U.S. Holders—Warrants” and “United States Federal Taxation—Tax Consequences
to U.S. Holders—Backup Withholding and Information Reporting.”
Section 871(m) Withholding Tax on
Dividend Equivalents
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.
In light of the economic terms of the Warrants,
payment on the Warrants to Non-U.S. Holders should not be subject to Section 871(m).
Both U.S. and non-U.S. investors considering
an investment in the Warrants should read the section of the accompanying prospectus supplement entitled “United States Federal
Taxation” and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the
Warrants, and any tax consequences arising under the laws of any state, local, or non-U.S. taxing jurisdiction. A holder who has made
a separate investment the return of which is based on or linked to the performance of the underlying (including any component thereof)
should discuss with its tax adviser the U.S. federal income tax consequences of an investment in the Warrants (including the potential
application of the “straddle” rules).
The discussion in the preceding paragraphs
under “United States Federal Taxation” and the discussion contained in the section entitled “United States Federal Taxation”
in the accompanying prospectus 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 income tax consequences
of an investment in the Warrants.