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Wow, when companies complain about short sellers, it's generally pretty dumb (and a sell signal), but this sounds like MS was trying to help people get around lockup agreements which is pretty bad behavior if true.
Wow, when companies complain about short sellers, it's generally pretty dumb (and a sell signal), but this sounds like MS was trying to help people get around lockup agreements which is pretty bad behavior if true.
For someone who knows nothing about shares, why is it a sell signal? I'd always assumed the issue was just that it was juvenile, not necessarily a cause for concern.
Companies complain about short sellers when they’re having cash flow problems and are dependent on the public markets to raise $ (by issuing new shares or in a bond offering), dto fund their operations. Short sellers can increase the cost of the company to raise money (eg if the company has a bond offering they may have to pay a higher interest rate if tons of shorts effectively lower the share price of the company).
The various news articles are terribly written (esp. the original nypost article), so here's what I can tell as someone with some knowledge of Lyft stock:
* Lyft's market standoff agreement is written loosely. Often such agreements enumerate a wide range of prohibited behaviors with the underlying stock during the lockup, banning all sorts of direct or indirect sells, hedges, hypothecation, etc. of the underlying stock. Lyft merely bans "selling or otherwise disposing" the company stock.
* Lyft has claimed (in emails to investors) that any transaction that transfers "economic interest" of the stock are prohibited.
So:
1. Via "https://nypost.com/2019/04/05/lyft-threatens-morgan-stanley-..., It looks like Morgan Stanley might have created a vehicle/security that inversely tracks Lyft. So the Lyft investors aren't per se shorting Lyft; MS is. This toes the line (as it is an indirect short), but I'd love to see legal experts weigh in.
2. Even then, I'm finding Lyft's position hard to rationalize. How does an agreement to ban sales bar any form of economic interest reduction? (e.g. buying puts, writing calls, hypothecating, etc.) I would think investors could execute equity collars on their Lyft position all they want per the agreement (and Morgan Stanley could be their counter-party), but Lyft is claiming otherwise.
Even though Morgan Stanley denies short-selling, I'm really trying to understand the legal issue they'd be under even if they were. The various news articles are terribly written (esp. the original nypost article), so here's what I can tell as someone with some knowledge of Lyft stock: * Lyft's market standoff agreement is written loosely. Often such agreements enumerate a wide range of prohibited behaviors with the…
From https://www.bloomberg.com/opinion/articles/2019-04-04/token-...
Even though Morgan Stanley denies short-selling, I'm really trying to understand the legal issue they'd be under even if they were. The various news articles are terribly written (esp. the original nypost article), so here's what I can tell as someone with some knowledge of Lyft stock: * Lyft's market standoff agreement is written loosely. Often such agreements enumerate a wide range of prohibited behaviors with the…
The issue (and, yes, the drafting of the agreement you point to may make this murkier than would generally be the case) sounds like tortious interferenxe. Supposing MS did create a shorting product for Lyft pre-IPO investors, and supposing that the pre-IPO investors are, as a class, prohibited from engaging with that product by contract with Lyft, and supposing MS knew about that prohibition, that would seem to be the issue.
Some other stories on this: https://nypost.com/2019/04/05/lyft-threatens-morgan-stanley-... https://techcrunch.com/2019/04/05/morgan-stanley-which-is-un... https://www.theinformation.com/articles/lyft-threatened-morg... The NYPost story includes the detail "We bought stock in a special acquisition vehicle and then the individual investors in the special acquisition vehicle shorted shares through Morgan Stanley ... Pr…
Obviously, if the investor engages in a transaction that leads to them to not benefiting from a rise in the stock, they've reduced their economic interest!
The answer (as I note elsewhere) is that the investors believe Lyft's lock-up language does not per se bar them from reducing "economic interest". The loose agreement only bars selling and presumably short-selling shares.
Even though Morgan Stanley denies short-selling, I'm really trying to understand the legal issue they'd be under even if they were. The various news articles are terribly written (esp. the original nypost article), so here's what I can tell as someone with some knowledge of Lyft stock: * Lyft's market standoff agreement is written loosely. Often such agreements enumerate a wide range of prohibited behaviors with the…
>It says in relevant part that “our directors, our executive officers and holders of a substantial portion of our capital stock and securities convertible into our capital stock have entered into lock-up agreements …pursuant to which each of these persons or entities, with limited exceptions, for a period of up to 180 days after the date of this prospectus, may not, without the prior written consent of J.P.Morgan Sec…
Update: Note that it is carefully worded: "Our directors, executive officers and holders of a substantial portion of our capital stock and securities convertible into our capital stock".
What probably happened is that the company required holders of only a "substantial portion" of stock to sign updated agreements with the underwriters. Neither I nor any of my Lyft stockholding friends ever entered into such an agreement (and Lyft isn't claiming that we, as minor shareholders, did). So as far as I can tell, nothing blocks us from hedging with Morgan Stanley or otherwise.
(Original post was thinking the S1 is wrong; it is not)
Earlier quoted context omitted.
From the article > tortious interference with the lock-up agreements
I always wonder how these can be enforced anyway, same for employees. Employees carry a huge risk in case the Lyft stock falls flat, they still have to pay all the taxes and company might not withhold enough (dont have any details on that, but it's rather typical) - will be interesting to watch how this goes down.
Earlier quoted context omitted.
>It says in relevant part that “our directors, our executive officers and holders of a substantial portion of our capital stock and securities convertible into our capital stock have entered into lock-up agreements …pursuant to which each of these persons or entities, with limited exceptions, for a period of up to 180 days after the date of this prospectus, may not, without the prior written consent of J.P.Morgan Sec…
EDIT: I actually read the S1 excerpt wrong. Update: Note that it is carefully worded: "Our directors, executive officers and holders of a substantial portion of our capital stock and securities convertible into our capital stock". What probably happened is that the company required holders of only a "substantial portion" of stock to sign updated agreements with the underwriters. Neither I nor any of my Lyft stockhold…