October 2022
Preliminary Terms No. 6,516
Registration Statement Nos. 333-250103;
333-250103-01
Dated September 29, 2022
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S. Equities
Market Linked Securities—Leveraged
Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities
Linked to the S&P 500® Index due November 2, 2028
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 at least 111% (to be determined on the pricing date) of the
percentage increase in the level of the underlying index from the starting level |
| § | If
the level of the underlying index has decreased, but the underlying index has not decreased
by more than 20%, investors will receive the face amount |
| § | If
the underlying index has decreased by more than 20%, investors will have 1-to-1 downside
exposure to the decrease in the level of the underlying index from the starting level in
excess of 20% |
| § | Investors
may lose up to 80% 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 in exchange for the participation
rate and buffer features that in each case apply 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 $911.90 per security, or within $11.90 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. 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 |
$45.20 |
$954.80 |
Total |
$ |
$ |
$ |
| (1) | Wells Fargo Securities, LLC, an agent for this offering,
will receive a commission of up to $45.20 for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”),
may receive a selling concession of up to $25.00 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 $1.50 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. |
Prospectus
dated November 16, 2020
Morgan Stanley |
Wells Fargo Securities |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
Issuer: |
Morgan
Stanley Finance LLC |
Guarantor: |
Morgan
Stanley |
Maturity
date: |
November
2, 2028†, 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
·
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
minus
If the ending level is less than
the threshold level, you will receive less, and up to 80% less, than the face amount of your securities at maturity. |
Participation
rate: |
At
least 111%, to be determined on the pricing date |
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: |
October
26, 2028**† |
Threshold
level: |
, which is 80% of the starting level |
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: |
October
28, 2022† |
Original
issue date: |
November
2, 2022† (3 business days after the pricing date) |
CUSIP
/ ISIN: |
61774HMC9
/ US61774HMC96 |
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 accompany 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 accompany product supplement
for principal at risk securities.
|
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 $911.90, or within $11.90 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
maximum return, the participation rate 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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
The Principal at Risk Securities Linked to the S&P 500®
Index due November 2, 2028 (the “securities”) can be used:
| § | As an alternative to direct exposure to the underlying index that enhances
returns for a certain range of positive performance of the underlying index |
| § | To enhance returns and potentially outperform the underlying index in a bullish
scenario |
| § | To achieve similar levels of upside exposure to the underlying index as a
direct investment while using fewer dollars by taking advantage of the participation rate |
| § | To obtain a buffer against a specified level of negative performance in the
underlying index |
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 20% from the starting level, resulting in a loss of some or a significant portion of the initial investment |
| § | 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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 |
Hypothetical participation rate: |
111%. The actual participation rate will be determined on the pricing date. |
Threshold level: |
80% of the starting level |
|
|
Securities
Payoff Diagram |
|
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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. Notwithstanding anything to the contrary in the accompanying product supplement for principal
at risk securities, the amount you will receive per $1,000 face amount of securities at maturity will
be the maturity payment amount, defined and calculated as provided in this document. 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: 6 years
Hypothetical starting level: 100.00
Threshold level: 80.00 (80%
of the hypothetical starting level)
Hypothetical participation
rate: 111%. The actual participation rate will be determined on the pricing date.
* 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 participation rate 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:
On the maturity date, you would receive
the maturity payment amount equal to $1,333.00 per $1,000 face amount of securities, resulting in a total return on the securities
of 33.30%.
Example 2—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 3—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 20%, you would lose a significant portion of the face amount of your securities and receive
the maturity payment amount equal to:
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 in excess
of 20%. Therefore, the maturity payment amount is equal to $700.00 per $1,000 face amount of securities, resulting in a total
loss on the securities of 30%.
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 in excess
of 20%. You may lose up to 80% of the face amount of your securities at maturity.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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) |
200.00 |
100.00% |
$2,110.00 |
111.00% |
190.00 |
90.00% |
$1,999.00 |
99.90% |
180.00 |
80.00% |
$1,888.00 |
88.80% |
170.00 |
70.00% |
$1,777.00 |
77.70% |
160.00 |
60.00% |
$1,666.00 |
66.60% |
150.00 |
50.00% |
$1,555.00 |
55.50% |
140.00 |
40.00% |
$1,444.00 |
44.40% |
130.00 |
30.00% |
$1,333.00 |
33.30% |
120.00 |
20.00% |
$1,222.00 |
22.20% |
110.00 |
10.00% |
$1,111.00 |
11.10% |
105.00 |
5.00% |
$1,055.50 |
5.55% |
100.00(3) |
0.00% |
$1,000.00 |
0.00% |
90.00 |
-10.00% |
$1,000.00 |
0.00% |
85.00 |
-15.00% |
$1,000.00 |
0.00% |
80.00 |
-20.00% |
$1,000.00 |
0.00% |
79.00 |
-21.00% |
$990.00 |
-1.00% |
70.00 |
-30.00% |
$900.00 |
-10.00% |
60.00 |
-40.00% |
$800.00 |
-20.00% |
50.00 |
-50.00% |
$700.00 |
-30.00% |
40.00 |
-60.00% |
$600.00 |
-40.00% |
30.00 |
-70.00% |
$500.00 |
-50.00% |
20.00 |
-80.00% |
$400.00 |
-60.00% |
10.00 |
-90.00% |
$300.00 |
-70.00% |
0.00 |
-100.00% |
$200.00 |
-80.00% |
*The
underlying index excludes cash dividend payments on stocks included in the underlying index.
| (1) | Assumes a participation rate of 111%. The actual participation
rate will be determined on the pricing date. |
| (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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 receive less, and up
to 80% less, than 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 80% of the starting level,
you will receive less, and up to 80% less, than the face amount of your securities at maturity. Investors may lose some or a significant
portion of their investment in 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 up to 80% 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 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. |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
| § | 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 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. Moreover,
certain |
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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. 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 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. |
| § | 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 two business days prior to the maturity date, the maturity date of the securities will be postponed to the second
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. If the Internal Revenue Service
(the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the securities
might differ significantly from the tax treatment described in the Tax Disclosure Sections. For example, under one
possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders
would be required to accrue into income original issue discount on the securities every year at a “comparable yield”
determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income. The
risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities,
would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not
have such features. We do not plan to request a ruling from the IRS regarding the tax treatment of the securities, and
the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections. |
In 2007, the U.S. Treasury Department and the
IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the
term of their investment. It also asks for comments on a
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
number of related topics, including the character
of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the
relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to
withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which very generally
can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice
requests comments on appropriate transition rules and effective dates, any 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. 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, the issues presented by this notice and 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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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.
The following graph sets forth the daily closing levels of the underlying
index for each quarter in the period from January 1, 2017 through September 28, 2022. The closing level of the underlying index on September
28, 2022 was 3,719.04. 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, 2017 to September
28, 2022
|
|
“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 500® Index” in the accompanying
index supplement.
Morgan Stanley Finance LLC
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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, a security should be treated
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. |
In 2007, the U.S.
Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal
income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on
whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments
should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature
of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals)
realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose
an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any 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, 2025 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, the issues presented by the aforementioned notice 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 and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the S&P 500® Index due November 2, 2028 |
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 $45.20 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 $25.00 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 $1.50 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. 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 June 30, 2022
Index
Supplement dated November 16, 2020
Prospectus
dated November 16, 2020
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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