As Morgan Stanley’s “Nuclear Option” Failed, Uber Stock Plunged
ZeroHedge, 14 May 2019
Uber’s underwriters, led by Morgan Stanley, were so (rightfully) worried that the company’s IPO was going to crater in the days after its public offering, they deployed what CNBC is calling “a nuclear option” and shorted IPO stock naked, even beyond the traditional greenshoe. Of course, anyone in the industry would simply call this “selling to the dumb money ahead of an obviously overpriced IPO,” but we digress.
This naked shorting is utilized as a tactic to “support the stock” in addition to the usual 15% greenshoe that underwriters overallocate just so they can cover into, if the stock is plunging, with hopes of stabilizing the drop (Morgan Stanley was also Uber’s very much ineffective stabilization agent). CNBC referred to the short covering as “a technique that goes above and beyond the traditional help a new offering can get.”
