|
March
2023
Pricing Supplement
No. 8,435
Registration
Statement No. 333-250103
Dated March
23, 2023
Filed pursuant
to Rule 424(b)(2) |
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
As further described below, interest will accrue and be payable on the
notes quarterly, in arrears, (i) from the original issue date to September 27, 2023: at a rate of 6.00% per annum and (ii) from
September 27, 2023 to maturity: at a variable rate per annum equal to the 2-Year U.S. Dollar SOFR ICE Swap Rate plus 0.50%,
subject to the minimum interest rate of 0.10% per annum.
Publication of the 2-Year U.S. Dollar SOFR ICE Swap Rate began on November
8, 2021 and it therefore has a very limited history. For further discussion of risks related to the notes, including risks related to
the reference rate, see “Risk Factors” beginning on page 7.
All payments are subject to the credit risk of Morgan Stanley. If
Morgan Stanley defaults on its 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 underlying reference asset or assets.
FINAL TERMS |
Issuer: |
Morgan Stanley |
Aggregate principal amount: |
$405,000 |
Issue price: |
$1,000 per note |
Stated principal amount: |
$1,000 per note |
Pricing date: |
March 23, 2023 |
Original issue date: |
March 27, 2023 (2 business days after the pricing date) |
Maturity date: |
March 27, 2025 |
Interest accrual date: |
March 27, 2023 |
Payment at maturity: |
The payment at maturity per note will be the stated principal amount plus accrued and unpaid interest, if any |
Reference rate: |
The 2-Year U.S. Dollar SOFR ICE Swap Rate (2CMS).
Please see “Additional Provisions—Reference Rate”
below. Please also see “Additional Provisions—Index Cessation,” which describes how a Benchmark Replacement will replace
2CMS following an Index Cessation Effective Date, and “Risk Factors—Risks Relating to the Reference Rate.” |
Interest rate: |
From and including the original issue date to but excluding
September 27, 2023: 6.00% per annum
From and including September 27, 2023 to but excluding the
maturity date (the “floating interest rate period”):
Reference rate plus 0.50%; subject to the minimum interest
rate.
For the purpose of determining the level of the reference rate
applicable to an interest payment period, the level of the reference rate will be determined two (2) U.S. government securities business
days prior to the related interest reset date at the start of such interest payment period (each, an “interest determination date”).
Interest for each interest payment period during the floating
interest rate period is subject to the minimum interest rate of 0.10% per annum. |
Interest payment period: |
Quarterly |
Interest payment period end dates: |
Unadjusted |
Interest payment dates: |
Each March 27, June 27, September 27 and December 27, beginning June 27, 2023; provided that if any such day is not a business day, that interest payment will be made on the next succeeding business day and no adjustment will be made to any interest payment made on that succeeding business day. |
Interest reset dates: |
Each March 27, June 27, September 27 and December 27, beginning September 27, 2023; provided that such interest reset dates shall not be adjusted for non-business days. |
Day-count convention: |
30/360 (Bond Basis) |
Minimum interest rate: |
0.10% per annum during the floating interest rate period |
Maximum interest rate: |
Not applicable |
Redemption: |
Not applicable |
Specified currency: |
U.S. dollars |
No listing: |
The notes will not be listed on any securities exchange. |
CUSIP / ISIN: |
61760QNW0 / US61760QNW05 |
Book-entry or certificated note: |
Book-entry |
Business day: |
New York |
Agent: |
Morgan Stanley & Co. LLC (“MS & Co.”), a wholly owned subsidiary of Morgan Stanley. See “Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.” |
Calculation agent: |
Morgan Stanley Capital Services LLC |
Trustee: |
The Bank of New York Mellon |
Estimated value on the pricing date: |
$991.40 per note. See “The Notes” on page 2. |
Commissions and issue price: |
Price to public |
Agent’s commissions(1) |
Proceeds to issuer(2) |
Per note |
$1,000 |
$3 |
$997 |
Total |
$405,000 |
$1,215 |
$403,785 |
| (1) | Selected dealers,
including Morgan Stanley Wealth Management (an affiliate of the agent), and their financial
advisors will collectively receive from the agent, MS & Co., a fixed sales commission
of $3 for each note they sell. See “Supplemental Information Concerning Plan of Distribution;
Conflicts of Interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying prospectus supplement. |
| (2) | See “Use of
Proceeds and Hedging” on page 12. |
The notes involve risks not associated with an investment in ordinary
debt securities. See “Risk Factors” beginning on page 7.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this pricing supplement or the accompanying prospectus supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
You should read this document together with the
related prospectus supplement and prospectus,
each of which can be accessed via the hyperlinks below.
Prospectus Supplement dated November 16, 2020 Prospectus dated November 16, 2020
The notes are not deposits or savings accounts and are not insured
by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed
by, a bank.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
The Notes
The notes are debt securities of Morgan Stanley. From the original issue
date until September 27, 2023, interest on the notes will accrue and be payable quarterly, in arrears, at 6.00% per annum, and thereafter,
during the floating interest rate period, interest on the notes will accrue and be payable quarterly, in arrears, at a variable rate per
annum equal to 2CMS plus 0.50%, subject to the minimum interest rate of 0.10% per annum. We describe the basic features
of these notes in the sections of the accompanying prospectus called “Description of Debt Securities—Floating Rate Debt Securities”
and prospectus supplement called “Description of Notes,” subject to and as modified by the provisions described below. All
payments on the notes are subject to the credit risk of Morgan Stanley.
The stated principal amount and issue price of each note is $1,000.
This price includes costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently,
the estimated value of the notes on the pricing date is less than the issue price. We estimate that the value of each note on the pricing
date is $991.40.
What goes into the estimated value on the pricing date?
In valuing the notes on the pricing date, we take into account that
the notes comprise both a debt component and a performance-based component linked to 2CMS. The estimated value of the notes is determined
using our own pricing and valuation models, market inputs and assumptions relating to 2CMS, instruments based on 2CMS, volatility and
other factors including current and expected interest rates, as well as an interest rate related to our secondary market credit spread,
which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the notes?
In determining the economic terms of the notes, including the interest
rate and the minimum interest rate applicable to each interest payment period during the floating interest rate period, 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 notes?
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to interest rates and 2CMS, 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, the costs of unwinding the related
hedging transactions and other factors.
MS & Co. may, but is not obligated to, make a market in the notes
and, if it once chooses to make a market, may cease doing so at any time.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Additional Provisions
The terms set forth in the accompanying prospectus under “Description
of Debt Securities—Base Rates—CMS Rate Debt Securities” shall not apply to the notes.
Reference Rate
2CMS is one of the market-accepted indicators of shorter-term interest
rates.
“2CMS” means that the rate for an interest reset date will
be the USD SOFR ICE Swap Rate with an index maturity of 2 years, expressed as a percentage, provided by the administrator of the USD SOFR
ICE Swap Rate as of approximately 11:00 a.m., New York City time (or any amended publication time specified by the administrator of the
USD SOFR ICE Swap Rate in the benchmark methodology) on the interest determination date. Reuters, Bloomberg and various other third-party
sources may report the USD SOFR ICE Swap Rate. If any such reported rate differs from that as provided by the administrator of the USD
SOFR ICE Swap Rate, the rate as provided by such administrator will prevail.
If that rate is subsequently corrected and provided by the administrator
of the USD SOFR ICE Swap Rate to, and published by, authorized distributors of the USD SOFR ICE Swap Rate within the longer of one hour
of the time when such rate is first published by authorized distributors of the USD SOFR ICE Swap Rate and the republication cut-off time
for the USD SOFR ICE Swap Rate, if any, as specified by the USD SOFR ICE Swap Rate benchmark administrator in the USD SOFR ICE Swap Rate
benchmark methodology, then that rate will be subject to those corrections.
“USD SOFR ICE Swap Rate” means the swap rate for a fixed-for-floating
U.S. Dollar swap transaction where the floating leg references the Secured Overnight Financing Rate administered by the Federal Reserve
Bank of New York (or any successor administrator) (SOFR), as provided by ICE Benchmark Administration Limited as the administrator of
the benchmark (or a successor administrator). For a description of SOFR, see “Secured Overnight Financing Rate” below.
Temporary Non-Publication
If the CMS Rate for a period of the index maturity in respect of an
interest reset date is not published by the administrator of the CMS Rate or an authorized distributor and is not otherwise provided by
the administrator of the CMS Rate by either (A) such interest reset date or (B) such other date on which the CMS Rate is required, then,
for such date, the calculation agent shall determine a commercially reasonable alternative for the CMS Rate, taking into account all available
information that in good faith it considers relevant including, without limitation, an industry-accepted rate of interest in the over-the-counter
derivatives market or for U.S. dollar-denominated floating rate notes (if any).
Notwithstanding the foregoing, if, as of an interest determination date,
an Index Cessation Effective Date with respect to the applicable tenor of the then-current CMS Rate has occurred, the provisions set forth
under “Index Cessation” below shall apply.
Index Cessation
If, as of an interest determination date, an Index Cessation Effective
Date with respect to the applicable tenor of the then-current CMS Rate has occurred, then the CMS Rate in respect of each following interest
reset date shall thereafter be the Benchmark Replacement (including any adjustment spread calculation (which may be a positive or negative
value or zero)) selected on that interest determination date by the calculation agent acting in good faith and in a commercially reasonable
manner. For the avoidance of doubt, following the occurrence of an Index Cessation Effective Date in respect of one or more Index Cessation
Events, the selection of the Benchmark Replacement (including any adjustment spread calculation) will be a one-time process and will apply
to each following interest reset date.
“CMS Rate” means, initially, 2CMS; provided that
if an Index Cessation Effective Date has occurred with respect to 2CMS or the then-current CMS Rate, then “CMS Rate” means
the applicable Benchmark Replacement. For the avoidance of doubt, such Benchmark Replacement will replace the then-current CMS Rate for
all purposes relating to the notes.
“Index Cessation Effective Date” means, in respect of the
then-current CMS Rate and one or more Index Cessation Events, the first date on which the CMS Rate would ordinarily have been published
or provided and is no longer published or provided. If the CMS Rate ceases to be provided on an interest determination date, but it was
provided at the time at which it is to be observed pursuant to “Reference Rate” above, then the Index Cessation Effective
Date will be the next day on which the rate would ordinarily have been published or provided.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
“Index Cessation Event” means, in respect of the then-current
CMS Rate:
| (a) | a public statement or publication of information by or on behalf of the administrator of the CMS Rate announcing that it has ceased
or will cease to provide the CMS Rate permanently or indefinitely; provided that, at the time of the statement or publication,
there is no successor administrator or provider, as applicable, that will continue to provide the CMS Rate; or |
| (b) | a public statement or publication of information by the regulatory supervisor for the administrator of the CMS Rate, the central bank
for the currency of the CMS Rate, an insolvency official with jurisdiction over the administrator for the CMS Rate, a resolution authority
with jurisdiction over the administrator for the CMS Rate or a court or an entity with similar insolvency or resolution authority over
the administrator for the CMS Rate, which states that the administrator of the CMS Rate has ceased or will cease to provide the CMS Rate
permanently or indefinitely; provided that, at the time of the statement or publication, there is no successor administrator or
provider that will continue to provide the CMS Rate. |
“Benchmark Replacement” means the first alternative benchmark
set forth in the order below that can be determined by the calculation agent as of the interest determination date next succeeding the
relevant Index Cessation Event (or, if the Index Cessation Event occurs on the interest determination date, that interest determination
date):
| (a) | the alternate rate of interest that has been selected or recommended by the relevant governmental body or agency with jurisdiction
over the then-current CMS Rate or the administrator thereof as the replacement for the then-current CMS Rate for the applicable index
maturity; and |
| (b) | the alternate rate of interest that has been selected by the calculation agent as the replacement for the then-current CMS Rate for
the applicable index maturity giving due consideration to any industry-accepted rate of interest as a replacement for the then-current
CMS Rate for U.S. dollar-denominated floating rate notes at such time, including any alternate rate of interest recommended by the International
Swaps and Derivatives Association, Inc. or any successor thereto. |
In connection with the implementation of a Benchmark Replacement, we
or our designee will have the right to make Benchmark Replacement Conforming Changes from time to time.
“Benchmark Replacement Conforming Changes” means, with respect
to any Benchmark Replacement, any changes (including changes to the definition of “interest payment period,” timing and frequency
of determining rates and making payments of interest, and other administrative matters) that the calculation agent determines may be appropriate
to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the calculation
agent determines that adoption of any portion of such market practice is not administratively feasible or if the calculation agent determines
that no market practice for use of the Benchmark Replacement exists, in such other manner as the calculation agent determines is reasonably
necessary).
Decisions and Determinations
Any determination, decision or election that may be made by us or our
designee or the calculation agent pursuant to this section entitled “Additional Provisions,” including any determination with
respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take
or refrain from taking any action or any selection:
| · | will be conclusive and binding absent manifest error; |
| · | will be made in such person’s sole discretion; and |
| · | notwithstanding anything to the contrary in the documentation relating to
the notes, shall become effective without consent from the holders of the notes or any other party. |
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Secured Overnight Financing Rate
As further described above, 2CMS is determined by reference to SOFR.
The Secured Overnight Financing Rate (“SOFR”) is published
by the New York Federal Reserve and is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury
securities. The New York Federal Reserve reports that SOFR includes all trades in the Broad General Collateral Rate and bilateral Treasury
repurchase agreement (repo) transactions cleared through the delivery-versus-payment service offered by the Fixed Income Clearing Corporation
(the “FICC”), a subsidiary of the Depository Trust and Clearing Corporation (“DTCC”), and SOFR is filtered by
the New York Federal Reserve to remove some (but not all) of the foregoing transactions considered to be “specials.” According
to the New York Federal Reserve, “specials” are repos for specific-issue collateral, which take place at cash-lending rates
below those for general collateral repos because cash providers are willing to accept a lesser return on their cash in order to obtain
a particular security.
The New York Federal Reserve reports that SOFR is calculated as a volume-weighted
median of transaction-level tri-party repo data collected from The Bank of New York Mellon as well as General Collateral Finance Repo
transaction data and data on bilateral Treasury repo transactions cleared through the FICC’s delivery-versus-payment service. The
New York Federal Reserve also notes that it obtains information from DTCC Solutions LLC, an affiliate of DTCC.
If data for a given market segment were unavailable for any day, then
the most recently available data for that segment would be utilized, with the rates on each transaction from that day adjusted to account
for any change in the level of market rates in that segment over the intervening period. SOFR would be calculated from this adjusted prior
day’s data for segments where current data were unavailable, and unadjusted data for any segments where data were available. To
determine the change in the level of market rates over the intervening period for the missing market segment, the New York Federal Reserve
would use information collected through a daily survey conducted by its Trading Desk of primary dealers’ repo borrowing activity.
Such daily survey would include information reported by Morgan Stanley & Co. LLC, a wholly owned subsidiary of Morgan Stanley, as
a primary dealer.
The New York Federal Reserve notes on its publication page for SOFR
that use of SOFR is subject to important limitations, indemnification obligations and disclaimers, including that the New York Federal
Reserve may alter the methods of calculation, publication schedule, rate revision practices or availability of SOFR at any time without
notice.
Each U.S. Government Securities Business Day, the New York Federal Reserve
publishes SOFR on its website at approximately 8:00 a.m., New York City time. If errors are discovered in the transaction data provided
by The Bank of New York Mellon or DTCC Solutions LLC, or in the calculation process, subsequent to the initial publication of SOFR but
on that same day, SOFR and the accompanying summary statistics may be republished at approximately 2:30 p.m., New York City time. Additionally,
if transaction data from The Bank of New York Mellon or DTCC Solutions LLC had previously not been available in time for publication,
but became available later in the day, the affected rate or rates may be republished at around this time. Rate revisions will only be
effected on the same day as initial publication and will only be republished if the change in the rate exceeds one basis point. Any time
a rate is revised, a footnote to the New York Federal Reserve’s publication would indicate the revision. This revision threshold
will be reviewed periodically by the New York Federal Reserve and may be changed based on market conditions.
Because SOFR is published by the New York Federal Reserve based on data
received from other sources, we have no control over its determination, calculation or publication. See “Risk Factors” below.
The information contained in this section “Secured Overnight Financing
Rate” is based upon the New York Federal Reserve’s Website and other U.S. government sources.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Historical Information
The following graph sets forth the historical percentage levels of the
reference rate as published by ICE Benchmark Administration Limited for the period from November 18, 2021 (the first day on which the
reference rate was reported by Bloomberg Financial Markets) to March 23, 2023. The historical levels of the reference rate should not
be taken as an indication of its future performance and no assurance can be given as to the level of the reference rate on any day during
the term of the notes. In addition, the historical levels of the reference rate do not reflect the 0.50% spread that will apply to the
interest that will accrue on the notes for each interest payment period during the floating interest rate period. We obtained the information
in the graph below from Bloomberg Financial Markets (“USISSO02 Index”), without independent verification.
* The red line in the graph above represents the minimum interest
rate of 0.10% per annum applicable to each interest payment period during the floating interest rate period.
You should note that publication of the reference rate began on November
8, 2021 and it therefore has a very limited history. Among other things, the reference rate may not increase or decrease over the term
of the notes in accordance with the trends depicted in the graph above and the size and frequency of any fluctuations in the reference
rate over the term of the notes, which we refer to as volatility, may be significantly different from the volatility of the reference
rate depicted in the graph above. See “Risk Factors—Risks Relating to the Reference Rate—The USD SOFR ICE Swap Rate
has a very limited history; the future performance of the USD SOFR ICE Swap Rate cannot be predicted based on historical performance.”
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Risk Factors
The notes involve risks not associated with an investment in ordinary
floating rate notes. An investment in the notes entails significant risks not associated with similar investments in a conventional debt
security, including, but not limited to, fluctuations in the reference rate and other events that are difficult to predict and beyond
the issuer’s control. This section describes the material risks relating to the notes. For a complete list of risk factors, please
see the accompanying prospectus supplement and prospectus. Investors should consult their financial and legal advisers as to the risks
entailed by an investment in the notes and the suitability of the notes in light of their particular circumstances.
Risks Relating to an Investment in the Notes
| § | The historical performance of the reference rate is not an indication of its future performance.
The historical performance of the reference rate should not be taken as an indication of its future performance during the term of
the notes. Changes in the levels of the reference rate will affect the trading price of the notes, but it is impossible to predict whether
such levels will rise or fall. There can be no assurance that the reference rate will be positive. |
| § | Investors are subject to our credit risk, and any actual or anticipated changes to our credit ratings
or credit spreads may adversely affect the market value of the notes. Investors are dependent on our ability to pay all amounts due
on the notes on interest payment dates and at maturity and therefore investors are subject to our credit risk and to changes in the market’s
view of our creditworthiness. The notes are not guaranteed by any other entity. If we default on our obligations under the notes, your
investment would be at risk and you could lose some or all of your investment. As a result, the market value of the notes prior to maturity
will be affected by changes in the market's view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase
in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes. |
| § | The price at which the notes may be sold prior to maturity will depend on a number of factors and
may be substantially less than the amount for which they were originally purchased. Some of these factors include, but are not limited
to: (i) actual or anticipated changes in the level of the reference rate, (ii) volatility of the level of the reference rate, (iii) changes
in interest and yield rates, (iv) any actual or anticipated changes in our credit ratings or credit spreads and (v) time remaining to
maturity. Generally, the longer the time remaining to maturity and the more tailored the exposure, the more the market price of the notes
will be affected by the other factors described in the preceding sentence. This can lead to significant adverse changes in the market
price of securities like the notes. Depending on the actual or anticipated level of the reference rate, the market value of the notes
is expected to decrease and you may receive substantially less than 100% of the issue price if you are able to sell your notes prior to
maturity. |
| § | The rate we are willing to pay for securities of this type, maturity and
issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower
rate and the inclusion of costs associated with issuing, selling, structuring and hedging the notes in the original issue price reduce
the economic terms of the notes, cause the estimated value of the notes to be less than the original issue price and will adversely affect
secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers,
including MS & Co., are willing to purchase the notes in secondary market transactions will likely be significantly lower than the
original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are
included in the original issue price and borne by you and because the secondary market prices will reflect our secondary market credit
spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type, the costs of unwinding the
related hedging transactions as well as other factors. |
The
inclusion of the costs of issuing, selling, structuring and hedging the notes in the original issue price and the lower rate we are willing
to pay as issuer make the economic terms of the notes less favorable to you than they otherwise would be.
| § | The estimated value of the notes is determined by reference to our pricing
and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price. These pricing
and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about future
events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities, our
models may yield a higher estimated value of the notes than those generated by others, including other dealers in the market, if they
attempted to value the notes. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which
dealers, including MS & Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value
of your notes at any time after the date of this pricing supplement |
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
will
vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions.
| § | The notes will not be listed on any securities exchange and secondary trading may be limited.
The notes will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the notes.
MS & Co. may, but is not obligated to, make a market in the notes and, if it once chooses to make a market, may cease doing so at
any time. When it does make a market, it will generally do so for transactions of routine secondary
market size at prices based on its estimate of the current value of the notes, taking into account its bid/offer spread, our credit spreads,
market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to
maturity and the likelihood that it will be able to resell the notes. Even if there is a secondary market, it may not provide enough
liquidity to allow you to trade or sell the notes easily. Since other broker-dealers may not participate significantly in the secondary
market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which MS &
Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the notes, it is likely that there would
be no secondary market for the notes. Accordingly, you should be willing to hold your notes to maturity. |
| § | Morgan Stanley & Co. LLC, which is a subsidiary of the issuer, has determined
the estimated value on the pricing date. MS & Co. has determined the estimated value of the notes on the pricing date. |
| § | The issuer, its subsidiaries or affiliates may publish research that could
affect the market value of the notes. They also expect to hedge the issuer’s obligations under the notes. The issuer or one
or more of its affiliates may, at present or in the future, publish research reports with respect to movements in interest rates generally
or SOFR or the reference rate specifically. This research is modified from time to time without notice to you and may express opinions
or provide recommendations that are inconsistent with purchasing or holding the notes. Any of these activities may affect the market value
of the notes. In addition, the issuer’s subsidiaries expect to hedge the issuer’s obligations under the notes and they may
realize a profit from that expected hedging activity even if investors do not receive a favorable investment return under the terms of
the notes or in any secondary market transaction. |
| § | The calculation agent, which is a subsidiary of the issuer, (or, if applicable, we or our designee)
will make determinations with respect to the notes. The calculation agent will make certain determinations with respect to the notes
as further described herein and in the accompanying prospectus. In addition, if the CMS Rate is not published for any day with respect
to which the level of such rate must be determined during the term of the notes or if an Index Cessation Effective Date has occurred,
the calculation agent and we or our designee will make certain determinations with respect to the notes in such person’s sole discretion
as further described under “Additional Provisions.” Any of these determinations may adversely affect the payout to investors.
Moreover, certain determinations may require the exercise of discretion and the making of subjective judgments, such as with respect to
the reference rate or any Benchmark Replacement Conforming Changes. These potentially subjective determinations may adversely affect the
payout to you on the notes. For further information regarding these types of determinations, see “Additional Provisions” above. |
Risks Relating to the Reference Rate
| § | The reference rate will be affected by a number of factors. A number of factors can affect the
reference rate, including, but not limited to: |
| § | supply and demand for overnight U.S. Treasury repurchase agreements; |
| § | trading and liquidity in the market for SOFR-based swaps and in the market for SOFR-linked financial
contracts more generally; |
| § | general economic conditions: the economic, financial, political, regulatory and judicial events that
affect financial markets generally will affect the reference rate; |
| § | prevailing interest rates: the reference rate is subject to daily fluctuations depending on prevailing
interest rates in the market generally; and |
| § | policies of the Federal Reserve Board regarding interest rates. |
These and other factors may have a negative
impact on the amount of interest payable on the notes and on the value of the notes prior to maturity.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
| § | The reference rate may be volatile. The reference rate is subject to volatility due to a variety
of factors affecting interest rates generally, including, but not limited to: |
| § | sentiment regarding the U.S. and global economies; |
| § | expectations regarding the level of price inflation; |
| § | sentiment regarding credit quality in the U.S. and global credit markets; |
| § | central bank policy regarding interest rates; and |
| § | performance of capital markets. |
Volatility
of the reference rate may adversely affect your return on the notes.
| § | The USD SOFR ICE Swap Rate has a very limited history; the future performance of the USD SOFR ICE
Swap Rate cannot be predicted based on historical performance. You should note that publication of the USD SOFR ICE Swap Rate began
on November 8, 2021 and it therefore has a very limited history. In addition, the future performance of the USD SOFR ICE Swap Rate cannot
be predicted based on the limited historical performance. The level of the USD SOFR ICE Swap Rate during the term of the notes may bear
little or no relation to the historical level of the USD SOFR ICE Swap Rate. Prior observed patterns, if any, in the behavior of market
variables and their relation to the USD SOFR ICE Swap Rate, such as correlations, may change in the future. The future performance of
the USD SOFR ICE Swap Rate is impossible to predict and therefore no future performance of the USD SOFR ICE Swap Rate or the notes may
be inferred from any historical performance. Historical performance data are not indicative of, and have no bearing on, the potential
performance of the USD SOFR ICE Swap Rate or the notes. Changes in the levels of the USD SOFR ICE Swap Rate will affect the return on
the notes and the trading price of such notes, but it is impossible to predict whether such levels will rise or fall. There can be no
assurance that the USD SOFR ICE Swap Rate will be positive. |
In addition, you should note that, in the
recent past, the USD LIBOR ICE Swap Rate was not published on a significant number of scheduled publication days. It is possible that
non-publication of the USD SOFR ICE Swap Rate may also occur in the future on some or a significant number of scheduled publication days.
For example, if the relatively new market for SOFR-based swaps is not sufficiently liquid, ICE Benchmark Administration Limited may be
unable to calculate and publish the USD SOFR ICE Swap Rate, which could adversely affect the value of the notes, the return on the notes
and the price at which you can sell such notes. See “Risk Factors—Risks Relating to an Investment in the Notes—The calculation
agent, which is a subsidiary of the issuer, (or, if applicable, we or our designee) will make determinations with respect to the notes.”
| § | The composition and characteristics of the USD SOFR ICE Swap Rate are not the same as those of the
USD LIBOR ICE Swap Rate and there is no guarantee that the USD SOFR ICE Swap Rate will be a comparable substitute for the USD LIBOR ICE
Swap Rate. The administrator of the USD SOFR ICE Swap Rate, ICE Benchmark Administration Limited, launched the USD SOFR ICE Swap Rate
to help the U.S. dollar derivatives market in its transition from LIBOR to SOFR. Both the USD SOFR ICE Swap Rate and the USD LIBOR ICE
Swap Rate are determined by reference to interest rate swaps that reference a specified floating rate. However, the composition and characteristics
of SOFR are not the same as those of LIBOR. SOFR is a broad Treasury repo financing rate that represents overnight secured funding transactions.
This means that SOFR is fundamentally different from LIBOR for two key reasons. First, SOFR is a secured rate, while LIBOR is an unsecured
rate. Second, SOFR is an overnight rate (with the USD SOFR ICE Swap Rate determined by reference to such rate compounded in arrears for
twelve months), while LIBOR represents interbank funding over different maturities. As a result, there can be no assurance that SOFR will
perform in the same way as LIBOR would have at any time, including, without limitation, as a result of changes in interest and yield rates
in the market, market volatility or global, national or regional economic, financial, political, regulatory, judicial or other events.
For example, since publication of SOFR began on April 3, 2018, daily changes in SOFR have, on occasion, been more volatile than daily
changes in comparable benchmark or other market rates. Consequently, there can be no assurance that the USD SOFR ICE Swap Rate will perform
in the same way as the USD LIBOR Swap Rate would have at any time. |
| § | The secondary trading market for notes linked to the USD SOFR ICE Swap Rate may be limited. Since
the USD SOFR ICE Swap Rate is a new market rate, the notes will likely have no established trading market when issued and an established
trading market may never develop or may not be very liquid. Market terms for debt securities linked to the USD SOFR ICE Swap Rate (such
as the notes), such as the spread, may evolve over time and, as a result, trading prices of the notes may be lower than those of later-issued
debt securities that are linked to the USD SOFR ICE Swap Rate. Similarly, if the USD SOFR ICE Swap Rate does not prove to be widely used
in debt securities similar to the notes, the trading price of |
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
the notes may be lower than that of debt
securities linked to rates that are more widely used. Investors in the notes may not be able to sell such notes at all or may not be able
to sell such notes at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.
Further, investors wishing to sell the notes during the floating interest rate period in the secondary market will have to make assumptions
as to the future performance of the USD SOFR ICE Swap Rate during the interest payment period in which they intend the sale to take place.
As a result, investors may suffer from increased pricing volatility and market risk.
| § | The administrator of the USD SOFR ICE Swap Rate may make changes that could change the value of the
USD SOFR ICE Swap Rate or discontinue the USD SOFR ICE Swap Rate and has no obligation to consider your interests in doing so. ICE
Benchmark Administration Limited (or a successor), as administrator of the USD SOFR ICE Swap Rate, may make methodological or other changes
that could change the value of the USD SOFR ICE Swap Rate, including changes related to the method by which the USD SOFR ICE Swap Rate
is calculated, eligibility criteria applicable to the transactions used to calculate the USD SOFR ICE Swap Rate, or timing related to
the publication of the USD SOFR ICE Swap Rate. In addition, the administrator may alter, discontinue or suspend calculation or dissemination
of the USD SOFR ICE Swap Rate. The administrator has no obligation to consider your interests in calculating, adjusting, converting, revising
or discontinuing the USD SOFR ICE Swap Rate. See “Risk Factors—Risks Relating to an Investment in the Notes—The calculation
agent, which is a subsidiary of the issuer, (or, if applicable, we or our designee) will make determinations with respect to the notes.” |
| § | In the event of an Index Cessation Effective Date, there is no guarantee that any Benchmark Replacement
will be a comparable substitute for the then-current CMS Rate. If, as of an interest determination date, an Index Cessation Effective
Date has occurred with respect to the applicable tenor of the then-current CMS Rate and one or more Index Cessation Events, then the interest
rate on the notes during the floating interest rate period will no longer be determined by reference to the then-current CMS Rate, but
instead will be determined by reference to a different rate, which will be a different benchmark than the then-current CMS Rate, plus
a spread adjustment, which we refer to as a “Benchmark Replacement,” as further described under “Additional Provisions—Index
Cessation” above. In such a case, in the first instance, the interest rate on the notes during the floating interest rate period
will be determined based on the alternate rate of interest that has been selected or recommended by the relevant governmental body or
agency with jurisdiction over the then-current CMS Rate or the administrator thereof as the replacement for the then-current CMS Rate
for the applicable index maturity. There can be no assurance that such a rate will be selected or recommended by the relevant governmental
body or agency. If such a Benchmark Replacement cannot be determined, then the interest rate on the notes during the floating interest
rate period will be determined based on the alternate rate of interest that has been selected by the calculation agent giving due consideration
to any industry-accepted rate of interest as a replacement for the then-current CMS Rate for U.S. dollar-denominated floating rate notes
at such time. No market consensus exists as to what rate or rates may become industry-accepted replacements for any CMS Rate. |
In addition, the terms of the notes expressly
authorize us or our designee to make Benchmark Replacement Conforming Changes with respect to, among other things, changes to the definition
of “interest payment period,” timing and frequency of determining rates and making payments of interest, and other administrative
matters. The selection of a Benchmark Replacement, the calculation of the interest rate on the notes during the floating interest rate
period by reference to a Benchmark Replacement (including any adjustment spread calculation), any implementation of Benchmark Replacement
Conforming Changes and any other determinations, decisions or elections that may be made under the terms of the notes in connection with
an Index Cessation Effective Date could adversely affect the value of the notes, the return on the notes and the price at which you can
sell such notes.
Any determination, decision or election
that may be made by the calculation agent or us or our designee described above will be made in such person’s sole discretion.
In addition, (i) the composition and characteristics
of the Benchmark Replacement will not be the same as those of the then-current CMS Rate, the Benchmark Replacement will not be the economic
equivalent of the then-current CMS Rate, there can be no assurance that the Benchmark Replacement will perform in the same way as the
then-current CMS Rate would have at any time and there is no guarantee that the Benchmark Replacement will be a comparable substitute
for the then-current CMS Rate (each of which means that an Index Cessation Effective Date could adversely affect the value of the notes,
the return on the notes and the price at which you can sell such notes), (ii) any failure of the Benchmark Replacement to gain market
acceptance could adversely affect the notes, (iii) the Benchmark Replacement may have a very limited history and the future performance
of the Benchmark Replacement cannot be predicted based on historical performance,
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
(iv) the secondary trading market for notes
linked to the Benchmark Replacement may be limited and (v) the administrator of the Benchmark Replacement may make changes that could
change the value of the Benchmark Replacement or discontinue the Benchmark Replacement and has no obligation to consider your interests
in doing so. Moreover, following the occurrence of an Index Cessation Effective Date in respect of one or more Index Cessation Events,
the selection of the Benchmark Replacement (including any adjustment spread calculation) will be a one-time process and will apply to
each following interest reset date. As a result, there is no guarantee that the interest rate on the notes during the floating interest
rate period at any time following the occurrence of an Index Cessation Effective Date will equal the interest rate that would have been
payable if such Index Cessation Effective Date had not occurred, which could adversely affect the value of the notes, the return on the
notes and the price at which you can sell such notes.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Use of Proceeds and Hedging
The proceeds we receive from the sale of the notes will be used for
general corporate purposes. We will receive, in aggregate, $1,000 per note issued, because, when we enter into hedging transactions in
order to meet our obligations under the notes, our hedging counterparty will reimburse the cost of the Agent’s commissions. The
costs of the notes borne by you and described on page 2 above comprise the Agent’s commissions and the cost of issuing, structuring
and hedging the notes.
Supplemental Information Concerning Plan of Distribution;
Conflicts of Interest
The agent may distribute the notes through Morgan
Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”), as selected dealer, or other dealers, which may include Morgan
Stanley & Co. International plc (“MSIP”) and Bank Morgan Stanley AG. Morgan Stanley Wealth Management, MSIP and Bank Morgan
Stanley AG are affiliates of Morgan Stanley. Selected dealers, including Morgan Stanley Wealth Management, and their financial advisors
will collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $3 for each note they sell.
MS & Co. is our wholly owned subsidiary and it
and other subsidiaries of ours expect to make a profit by selling, structuring and, when applicable, hedging the notes.
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.
Acceleration Amount in Case of an Event of Default
In case an event of default with respect to the notes shall have occurred
and be continuing, the amount declared due and payable per note upon any acceleration of the notes shall be an amount in cash equal to
the stated principal amount plus accrued and unpaid interest.
Validity of the Notes
In the opinion of Davis Polk & Wardwell LLP, as special counsel
to Morgan Stanley, when the notes offered by this pricing supplement have been executed and issued by Morgan Stanley, authenticated by
the trustee pursuant to the Senior Debt Indenture and delivered against payment as contemplated herein, such notes will be valid and binding
obligations of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including,
without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion
as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above.
This opinion is given as of the date hereof and is limited to the laws of the State of New York and the General Corporation Law of the
State of Delaware. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and
delivery of the Senior Debt Indenture and its authentication of the notes and the validity, binding nature and enforceability of the Senior
Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2020, which is Exhibit 5-a
to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2020.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Tax Considerations
In the opinion of our counsel, Davis Polk & Wardwell LLP, the notes
should be treated as “variable rate debt instruments” for U.S. federal tax purposes, and the remainder of this discussion
assumes this treatment is correct.
The treatment of the notes depends on whether the initial fixed rate
is within 0.25% of the floating rate on the issue date.
If the notes had been issued on March 23, 2023, the notes would have
been treated as “variable debt instruments” providing for a single fixed rate followed by a single qualified floating rate
(“QFR”), as described in the sections of the accompanying prospectus supplement called “United States Federal Taxation—Tax
Consequences to U.S. Holders—Notes—Floating Rate Notes—General” and “—Floating Rate Notes that Provide
for Multiple Rates,” because the fixed rate would not have been within 0.25% of the floating rate on the issue date. If the fixed
rate is not within 0.25% of the floating rate on the issue date, then applicable Treasury Regulations require that, in order to determine
the amount of qualified stated interest (“QSI”) and original issue discount (“OID”) in respect of the notes, an
equivalent fixed rate debt instrument must be constructed. The equivalent fixed rate debt instrument is constructed in the following manner:
(i) first, the initial fixed rate is converted to a QFR that would preserve the fair market value of the notes, and (ii) second, each
QFR (including the QFR determined under (i) above) is converted to a fixed rate substitute (which will generally be the value of that
QFR as of the issue date of the notes). The rules under “United States Federal Taxation—Tax Consequences to U.S. Holders—Notes—Discount
Notes—General” must be applied to the equivalent fixed rate debt instrument to determine the amounts of QSI and OID on the
notes. Under this method, the notes may be issued with OID.
Alternatively, if the fixed rate is within 0.25% of the floating rate
on the issue date, the notes should instead be treated as providing for a single QFR, because the fixed rate would be within 0.25% of
the floating rate. In that event the notes will not be treated as issued with OID and all of the interest paid on the notes will be treated
as QSI.
A U.S. holder is required to include any QSI in income in accordance
with the U.S. holder’s regular method of accounting for U.S. federal income tax purposes. U.S. holders will be required to include
OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of
interest. QSI allocable to an accrual period must be increased (or decreased) by the amount, if any, which the interest actually accrued
or paid during an accrual period (including the fixed rate payments made during the initial period) exceeds (or is less than) the interest
assumed to be accrued or paid during the accrual period under the equivalent fixed rate debt instrument. For the QSI and the amount of
OID (if any) on a note, please contact Morgan Stanley at StructuredNotesTaxInfo@morganstanley.com.
If you are a non-U.S. holder, please read the section of the accompanying
prospectus supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”
Both U.S. and non-U.S. holders should read the section of the accompanying
prospectus supplement entitled “United States Federal Taxation.”
You should consult your tax adviser regarding all aspects of the U.S.
federal tax consequences of an investment in the notes, as well as any tax consequences arising under the laws of any state, local or
non-U.S. taxing jurisdiction. Moreover, neither this document nor the accompanying prospectus supplement addresses the consequences to
taxpayers subject to special tax accounting rules under Section 451(b) of the Internal Revenue Code of 1986, as amended.
The discussion in the preceding paragraphs under “Tax Considerations,”
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 tax consequences of an investment in the notes.
Fixed to Floating Rate Notes due 2025
Based on the 2-Year U.S. Dollar SOFR ICE Swap Rate
Where You Can Find More Information
Morgan Stanley has filed a registration statement (including a prospectus,
as supplemented by a prospectus supplement) with the Securities and Exchange Commission, or SEC, for the offering to which this pricing
supplement relates. You should read the prospectus in that registration statement, the prospectus supplement and any other documents relating
to this offering that Morgan Stanley has filed with the SEC for more complete information about Morgan Stanley 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 will arrange
to send you the prospectus and the prospectus supplement if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at.www.sec.gov as
follows:
Prospectus Supplement dated November 16, 2020
Prospectus dated November 16, 2020
Terms used but not defined in this pricing supplement are defined in
the prospectus supplement or in the prospectus. As used in this pricing supplement, the “Company,” “we,” “us”
and “our” refer to Morgan Stanley.
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