It seems that all-out war has broken out in the ride-hailing services arena with the newly public Lyft threatening Morgan Stanley with legal action earlier this week, according to a report by The Information. As per the report, Lyft is demanding a letter from the investment bank to stop marketing a short-selling product that the ride-hailing firm believed was disrupting trading in its stock.
According to a report by the New York Post on Monday, Morgan Stanley, the lead underwriter for Uber’s upcoming IPO, had been helping Lyft’s pre-IPO investors protect against a decline in the stock — despite “lock-up” agreements.
The Post further revealed that three sources, including an insider at Morgan Stanley and a pre-IPO investor who hedged through the bank, confirmed that Morgan Stanley was involved in the bets.
Three days after the story was carried by The Post, Morgan Stanley issued a statement denying being involved in any such activity.
“Morgan Stanley did not market or execute total return or hedging products, or any short product on Lyft shares. We did not execute, directly or indirectly, a short sale for anyone identified by the company or otherwise known to us to be the subject of a Lyft lock-up agreement,” the statement said.
But the statement is contradictory to the statement by the pre IPO investor who hedged through Morgan.
“We bought stock in a special acquisition vehicle and then the individual investors in the special acquisition vehicle shorted shares through Morgan Stanley,” said the pre-IPO investor.
Speaking to TechCrunch, Morgan Stanley spokesman Mark Lake said, “Our firm’s activities have been in the normal course of market making, and any suggestion that Morgan Stanley engaged in an effort to apply short pressure to Lyft is false.”
As of now, no further action has been taken by Lyft, but a letter has been sent to the bank by Lyft’s attorneys.