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Morgan Stanley is trying to distance itself from its role in helping Lyft's early investors bet against the company after the company threatened to sue them and report them to regulators, the Post Office reported.
On Monday, the Post announced that Morgan Stanley, the main underwriter of Uber's upcoming IPO, was helping Lyft's pre-IPO investors to protect themselves from a decline in the stock, despite deal agreements. "Blockage" to prevent these investors from betting against the company as a result of its public offering of shares.
Three sources – including an insider at Morgan Stanley and an investor before the IPO who had covered through the bank – confirmed that Morgan Stanley had participated in the bets.
On Thursday, three days after the report in The Post, Morgan Stanley asked that the report be updated to include a statement denying the bank involved in Lyft-related hedging.
"Morgan Stanley has not marketed or executed total yield or hedging products, nor short-term product on Lyft's shares," the statement said. "We have not carried out, directly or indirectly, a short sale for a person identified by the company or of which we know besides that it is the subject of a lock-up contract with Lyft. "
But sources, including the investor before the IPO that had been covered by Morgan, continue to insist that hedging took place.
"We bought shares in a special acquisition vehicle, and then individual investors in the special short-term securities acquisition vehicle through Morgan Stanley," according to the investor before the IPO. "Morgan Stanley has provided the bulk of the loan to sell short the action."
Now, it appeared that Morgan Stanley's denial came right after a stern letter from Lyft asking if Morgan Stanley was engaging in "tortious interference," according to a copy of The Post's April 2 letter.
Lyft's letter, which was first reported by The Information, also threatened to take legal action and warned of the potential impact of regulation.
The regulator of the financial sector began to collect information on Lyft's transactions, told La Poste an informed source of the situation.
Meanwhile, Morgan still offered bets, known as total return swaps, as of Friday night, told The Post a Wall Street officer informed of the deal.
"It's a relatively unethical thing to do, and it's not normal," said the person, adding that it was not illegal either.
Lyft was one of the most anticipated IPOs in 2019. Overseas IPO shares rose 21% immediately after their Nasdaq debut on March 29 – before the appetite for shorting the title does not develop.
"Uber's dirty tricks are being used," Lyft's Lyft source told The Post, noting that Morgan Stanley was the main underwriter of Uber's IPO.
The stock regained its balance and closed at $ 74.45 on Friday.
Investors in the pre-IPO phase are not contractually allowed to reduce their "economic interest" in Lyft for six months, which includes short selling of the security. However, sources said Lyft's investors had solved the problem by placing the bets so that they did not benefit from a decline or a rise in the security. Instead, they simply keep their IPO earnings, which were significant.
Lyft representatives declined to comment. Morgan Stanley declined further comments.
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