Lyft reportedly threatened litigation against Morgan Stanley in a letter sent to the investment bank on Tuesday, accusing the firm of supporting short-selling for investors who are subject to lock-up agreements.
In the letter, Lyft questioned the firm about its alleged role in helping market certain products that would help pre-IPO investors bet against the stock, according to a CNBC report citing the letter and unidentified sources. The letter was signed by Peter Stris of law firm Stris & Maher, serving as the counsel for Lyft, CNBC reported.
Lyft and Stris & Maher did not respond to requests for comment.
The development follows reporting by The New York Post on Monday that Morgan Stanley had been intentionally helping pre-IPO investors protect against a decline in the stock, despite so-called “lock-up” agreements that are intended to prevent them from doing so. Morgan Stanley is the leader underwriter for the upcoming IPO of Uber -- Lyft’s biggest ride-sharing rival.
The Post also reported that the lock-up agreements were written in a way that allowed Lyft Investors to make limited “short” bets. Short sellers are investors who bet that Lyft will lose value.
According to CNBC, Morgan Stanley has not formally responded to the letter.
However, in a statement to FOX Business, a spokesperson for Morgan Stanley denied executing, “directly or indirectly, a sale, short sale, hedge, swap or transfer of risk or value associated with Lyft stock for any Lyft shareholders identified by the company or otherwise known to use to be the subject of a Lyft lock-up agreement.
“Our firm’s activity has been in the normal course of market-making, and any suggestion that Morgan Stanley has engaged in an effort to apply ‘short pressure’ to Lyft is false,” the spokesperson said.
The Information first reported on the threat of legal action by Lyft.
Lyft, which was valued at roughly $24 billion, debuted at the end of March, initially trading for $87.24 apiece -- far above the $72 per share it had been priced at. It was one of the most highly anticipated IPOs of the year. Lyft closed at $74.45 per share on Friday.