Chicago, May 18 – Morgan Stanley Finance LLC priced $528,000 contingent outperformance warrants due June 29, 2023, according to a 424B2 filing with the Securities and Exchange Commission.
The notional amount is $1,000 per warrant. The premium amount and original issue price is $132 per warrant.
The principal-at-risk warrants are guaranteed by Morgan Stanley.
The return will be based on the inverse performance of the Consumer Discretionary Select Sector SPDR fund and the performance of a long basket consisting of three exchange-traded funds relative to a short basket consisting of four exchange-traded funds.
If the final share price of the Consumer Discretionary Select Sector SPDR fund is less than its initial share price, the warrants will be automatically exercised on the expiration date, and there will be a cash settlement amount, which may be zero, on the cash settlement date based on any outperformance of a basket consisting of three exchange-traded funds relative to the performance of a basket consisting of four exchange-traded funds.
Upon automatic exercise, meaning that the fund has depreciated, if the long basket outperforms the short basket, investors will receive an amount in cash per warrant based upon the difference between the percentage performance of the long basket and the percentage performance of the short basket. Otherwise, investors will lose everything.
Additionally, if the final share price of the consumer discretionary fund is greater than or equal to its initial share price, the warrants will not be exercised and will expire worthless on the expiration date.
The baskets are evenly distributed amongst their components.
The long basket contains the SPDR Gold Trust, the First Trust Natural Gas ETF and the Energy Select Sector SPDR fund, with gold having a 1% additional weight since 100 is not evenly split into three.
The short basket is comprised of the iShares iBoxx $ High Yield Corporate Bond ETF, iShares 20+ Year Treasury Bond ETF, iShares U.S. Consumer Discretionary ETF and Consumer Discretionary Select Sector SPDR fund, evenly weighted at 25% each.
Morgan Stanley & Co. LLC and Stifel Nicolaus & Co. are the agents.
| Issuer: | Morgan Stanley Finance LLC
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| Guarantor: | Morgan Stanley
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| Issue: | Contingent outperformance warrants
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| Underlying ETFs: | Consumer Discretionary Select Sector SPDR fund, SPDR Gold Trust, First Trust Natural Gas ETF, Energy Select Sector SPDR fund, iShares iBoxx $ High Yield Corporate Bond ETF, iShares 20+ Year Treasury Bond ETF and iShares U.S. Consumer Discretionary ETF
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| Warrants: | 4,000
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| Notional amount per warrant: | $1,000
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| Price per warrant: | $132
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| Value on pricing date: | $104.70 per $132 premium amount
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| Total price: | $528,000
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| Maturity date: | June 26, 2023
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| Payout: | For the warrants to not be worthless, the Consumer Discretionary Select Sector SPDR fund has to decline from its initial price as a first condition and then the payout related to the $132 premium amount of each warrant will be based on the product of the $1,000 notional amount and the outperformance return which is the difference in the percentage performance of the long basket and the percentage performance of the short basket
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| Initial price: | $134.63 for Consumer Discretionary Select Sector SPDR fund
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| Long basket initial prices: | $172.69 for SPDR Gold Trust, $25.09 for First Trust Natural Gas ETF and $77.74 for Energy Select Sector SPDR fund
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| Short basket initial prices: | $73.82 for iShares iBoxx $ High Yield Corporate Bond ETF, $111.72 for iShares 20+ Year Treasury Bond ETF, $55.58 for iShares U.S. Consumer Discretionary ETF and $134.63 for Consumer Discretionary Select Sector SPDR fund
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| Warrant premium percentage: | 13.2%
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| Pricing date: | June 24, 2022
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| Settlement date: | June 28, 2022
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| Agents: | Morgan Stanley & Co. LLC and Stifel Nicolaus & Co.
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| Fees: | 3.7878%
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| Cusip: | 61774B382
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