It’s getting bare-knuckled on the market once more within the ride-hailing wars.
In response to a report earlier right now from The Info, newly public Lyft threatened Morgan Stanley with authorized motion earlier this week, demanding in a letter that the highly effective funding financial institution cease advertising a short-selling product that it believed was disrupting buying and selling in its inventory.
It says Lyft realized concerning the product via the New York Submit, which reported in its personal, separate story early this week that Morgan Stanley — the lead underwriter for Uber’s IPO — had been calling pre-IPO buyers in Lyft’s providing and pitching them on a solution to lock in good points, no matter Lyft’s lockup agreements with these buyers.
At first look, it looks as if the form of soiled pool we’ve grown accustomed to seeing between the rival corporations and their associates. However Morgan Stanley spokesman Mark Lake tells TechCrunch that the New York Submit report was flat-out fallacious, offering us with the next assertion: “Morgan Stanley didn’t market or execute, instantly or not directly, a sale, quick sale, hedge, swap, or switch of danger or worth related to Lyft’s inventory for any Lyft shareholder recognized by the corporate or in any other case recognized to us to be the topic of a Lyft lock-up settlement.
“Our agency’s actions have been within the regular course of market making, and any suggestion that Morgan Stanley engaged in an effort to use quick strain to Lyft is fake.”
What went fallacious is tough to know, on condition that the Submit shielded its sources. But it surely was extremely descriptive in the way it characterised the purported short-selling scheme. From its story:
Driving the weird bets is language in Lyft’s lock-up agreements that has hedge funds and different early Lyft buyers giving themselves a inexperienced mild to make restricted “quick” bets, which become profitable on a inventory’s decline. The purpose is to place the bets in such a means that buyers don’t profit from a decline or an increase within the inventory, however merely to lock of their IPO good points, which had been important.
“If I can lock in $70 now, I’m going to try this,” mentioned an investor.
“Lyft made a mistake,” one investor who purchased into Lyft shares previous to the IPO advised The Submit. “Individuals who personal the inventory are allowed to hedge their positions. You aren’t allowed to cut back your financial curiosity.”
The investor was referring to a current e-mail Lyft despatched to buyers reminding them that they aren’t allowed to have interaction in any transactions which may have an effect on a holder’s “financial curiosity ” within the inventory. This — and different “lock-up” language across the IPO — has Lyft buyers defending towards a decline in an quantity equivalent to their inventory holdings, quite than betting on the inventory’s decline.
We’ve reached out to Lyft for remark, which has but to reply.
A supply conversant in the scenario confirms that Lyft’s ire with Morgan Stanley rests totally on that Submit piece, as famous in The Info. We’re advised that no additional motion has been taken, past the letter despatched to the financial institution by Lyft’s attorneys.
Whether or not the story ends right here stays to be seen. The Info has up to date its unique put up to incorporate a part of Morgan Stanley’s assertion of denial, nevertheless it continues to report that, in keeping with one among its sources, Morgan Stanley had been calling early Lyft buyers for weeks throughout its roadshow and pitching them on a short-selling transaction that will allow them to lock in good points, whatever the lockup.
Assuming Morgan Stanley is telling the reality — and we are able to’t think about the financial institution would go on the document in any other case — there’s nonetheless the query of who floated misinformation a few short-selling product within the first place. It might be one which regulators wish to dig into. Keep tuned.