According to CNBC, the ridesharing company, which just went public last month, sent a letter to Morgan Stanley on April 2 asking the firm about its alleged role in selling a short product to pre-IPO investors. Lyft wants Morgan Stanley to go on record saying that they did not engage in this type of activity, or if it did, that it practiced proper due diligence in marketing it. In addition, the company has asked that if Morgan Stanley did sell or market this product, that it stop immediately, as well as provide a list of any involved shareholders.
Lyft added that it was prepared to take legal action against Morgan Stanley if necessary and asked that the firm respond to the allegations by the end of the day on April 2. Two sources, however, said that Morgan Stanley has yet to formally respond to Lyft’s requests.
A Morgan Stanley spokesperson did give a statement to CNBC, saying that the firm “did not market or execute, directly or indirectly, a sale, short sale, hedge, swap or transfer of risk or value associated with Lyft stock for any Lyft shareholder identified by the company or otherwise known to us to be the subject of a Lyft lock-up agreement.”
Lyft’s shares fell as much as 12 percent on their second day of trading, with some traders saying that the drop was possibly due in part to early demand for short-selling the shares.
“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 for Morgan Stanley said.
In the meantime, a source revealed that the Financial Industry Regulatory Authority has gotten involved in the matter, which might also be subject to an investigation by the Securities and Exchange Commission.