Lyft has threatened litigation against Morgan Stanley, accusing the firm of supporting short-selling for investors who are subject to lock-up agreements.

In a letter sent to Morgan Stanley on April 2, Lyft questioned the firm about its alleged role in helping market certain products that would help pre-IPO investors bet against the stock.

CNBC reviewed a copy of this letter, which was signed by Lyft’s counsel Peter Stris of the law firm Stris & Maher. Lyft declined to comment.

The letter was prompted by reporting in the New York Post, which said Morgan Stanley had been selling a short product to pre-IPO investors and cited three sources close to the situation.

Lyft asked Morgan Stanley to go on record saying that they did not create such a product, and that they had engaged in the proper due diligence in marketing such a product.

The letter, which copied Lyft’s lead underwriters JP Morgan and Credit Suisse, also asks that if Morgan Stanley did engage in such activity that they stop immediately and turn over a list of shareholders who participated.

While the letter requested that Morgan Stanley respond by the end of the day on April 2, two source close to the matter said that as of late Friday, the firm had yet to do so formally. Both people asked for anonymity discussing private details involving the dispute.

However, a Morgan Stanley spokesperson provided 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.”

The Information first reported that Lyft and its IPO syndicate had sent a letter to Morgan Stanley over its purported role in creating special instruments for pre-IPO investors to short.

In the letter, Lyft said that it has the ability to take legal action against Morgan Stanley and asked that the firm turn over relevant documents in advance of potential litigation.

Lyft’s counsel believes that Morgan Stanley could be found to have engaged in tortious interference with the lock-up agreements if it were true that the firm actively sought to circumvent them.

Lyft’s shares plummeted as much as 12% on their second day of trading, following their IPO debut on March 29. Some traders in the market speculated that the drop was partly due to early demand for short selling the shares. The stock rebounded over the course of the week.

“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.

Morgan Stanley’s short sales were less than 1.3% of the total volume of Lyft, according to a person familiar with Morgan Stanley’s operations.

The single largest short-trade executed on behalf of a client was 425,000 shares, said the person, who asked not to be named discussing private details about the firm’s trading activity.

The Financial Industry Regulatory Authority, which is the self-regulatory organization that patrols the banking industry, has already gotten engaged on the matter, one person with knowledge of the matter said.

This may also fall under the domain of the Securities and Exchange Commission, although CNBC was unable to learn whether the SEC has started any discussions at this time.

The Information reported earlier that Finra has gotten involved in the matter.

The dispute also comes as a long pipeline of tech companies are waiting to make their own debuts this year. Lyft’s rival Uber is set to go public in the coming months.

Morgan Stanley had won the coveted role of underwriting Uber’s IPO. The bankers who are managing that deal were also copied in on the letter, which is notable because the creation of financial products for short selling would be typically done in another division at the firm — not within investment banking.

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