The Dual Directional Trigger PLUS Based on the iShares®Silver Trust due May 5, 2027 (Trigger PLUS) is a principal at risk security issued by Morgan Stanley Finance LLC (MSFL) and guaranteed by Morgan Stanley. It offers investors the potential for positive returns based on the performance of the iShares®Silver Trust (the underlying commodity shares), which tracks the price of silver.
Key Features:
- Upside Scenario: If the final share price of the underlying commodity shares is greater than the initial share price at maturity, investors receive the stated principal amount plus a leveraged upside performance (200% of the appreciation) up to a maximum payment of $1,620 per Trigger PLUS (162% of the stated principal amount). For example, if the final share price is 5% greater than the initial share price, the total return at maturity is 10% ($1,100 per Trigger PLUS).
- Absolute Return Scenario: If the final share price is less than or equal to the initial share price but greater than or equal to 80% of the initial share price (the trigger level), investors receive a positive return equal to the absolute value of the percentage decline in the share price, up to a maximum return of 20% ($1,200 per Trigger PLUS).
- Downside Scenario: If the final share price is less than the trigger level, investors receive an amount significantly less than the stated principal amount, with a loss of 1% of the principal for every 1% decline in the share price. The payment at maturity could be less than $800 per Trigger PLUS and could even be zero.
- Guarantee: The Trigger PLUS are guaranteed by Morgan Stanley, but this guarantee is subject to Morgan Stanley's credit risk.
- Maturity: May 5, 2027
Risks:
- Principal at Risk: The Trigger PLUS do not pay interest or guarantee the return of principal. Investors may lose their entire initial investment.
- Limited Upside: The maximum payment at maturity caps the potential upside return.
- Market Price Volatility: The market price of the Trigger PLUS is influenced by various factors, including the price of the underlying commodity shares, volatility, interest rates, and Morgan Stanley's creditworthiness. The price may be significantly lower than the issue price in the secondary market.
- Credit Risk: Investors are exposed to the credit risk of Morgan Stanley. Any default by Morgan Stanley could result in a loss of the investment.
- Underlying Commodity Risk: The Trigger PLUS are linked to the price of a single commodity (silver), which can be more volatile and may not correlate with other commodities or broad-based indices. The price of silver is affected by various factors, including demand, supply, economic trends, and geopolitical events.
- Secondary Market Liquidity: The Trigger PLUS will not be listed on any securities exchange, and secondary trading may be limited, making it difficult to sell the security before maturity.
- Calculation Agent Discretion: The calculation agent (MS & Co.) has the discretion to make certain determinations, including whether a market disruption event has occurred, which could affect the payment at maturity.
- Hedging and Trading Activities: The hedging and trading activities of MSFL's affiliates could potentially affect the value of the Trigger PLUS.
- Tax Considerations: The U.S. federal income tax consequences of an investment in the Trigger PLUS are uncertain due to the lack of governing authority.
Conclusion:
The Trigger PLUS offers investors the potential for enhanced returns based on the performance of the underlying commodity shares, but it also carries significant risks, including the risk of losing the entire principal investment. Investors should carefully consider these risks before investing in the Trigger PLUS.
