Stocks

Short Sellers Are Out To Get Lyft – Part 2

I last wrote about Lyft one week ago,

Short Sellers Are Out To Get Lyft

Wednesday was the first settlement day for Lyft shares and hedge funds were salivating at the opportunity to short the stock. Short sellers shorted over 6 million shares which represented about 20% of the available shares outstanding.

At the time, price was at $72.

NOTE: that line at $42 is there because Michael Ward of Seaport Global Securities thinks Lyft’s current valuation bakes in “overly optimistic” assumptions about the transformational nature of ride hailing and thinks price is headed to $42.

Price now stands at $59.

There was a article by the New York Post that stated Morgan Stanley, the lead underwriter for Uber’s IPO helped Lyft’s pre-IPO investors hedge their investment and said their sources were an insider at Morgan Stanley and a pre-IPO investor who hedged through the bank.

Source

Lyft is now considering pursuing litigation after it accused Morgan Stanley of supporting short-selling. In the letter that was sent to Morgan Stanley, 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. But of course, Morgan Stanley denied any wrong doing.

I anticipate the drama to continue, but I feel sorry for the retail investor. Early investor who go in Lyft in 2014, paid the equivalent of $10 / share. Carl Ichan’s company purchased a $100-million stake or a 2.5% stake in Lyft in 2015, but sold it prior to the IPO for $550 million. Lyft’s largest shareholders is the mutual fund giant Fidelity and stands to make a handsome profit after the lock-up period is over this Fall. But the retail investor bought shares on the first trading day in high 70s, even in the 80s price range, only to see their ROI down 20%+.

The business of trading is not for the faint of heart. This business of trading isn’t random. If you want to be successful, you have to learn and do what the Smart Money does. Actually, it’s even simpler than that. What’s this dozen eggs worth?

Would you buy these cage free chicken eggs for $12? I didn’t think so, but you would buy it at $2. Just apply this same line of thinking to the stock market.

That’s all the Smart Money does and if you can’t value a stock, just mimic them and buy when they buy and sell when they sell because they leave their finger prints are all over the charts.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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