Morgan Stanley sells 115% of the stock, i.e. they sold stock that doesn't exist. Then they expect people who bought the IPO to immediately sell, and then Morgan Stanley buys that stock.
This does two things: It shows buying activity on the open market, raising the price.
And it covers their extra 15% that they sold, so all is well?
Yes unless the price doesn't tank but rises, in which case Morgan Stanley would've lost a lot of money (they have to buy back on the open market). Apparently they were certain enough that the price would fall that it was worth the risk.
The extra 15% (greenshoe) is covered either way, because they can buy it at the IPO price from founders if the stock goes up. Here we're talking about an additional exposure beyond that 15% that is not protected against losses.
Morgan Stanley sells 115% of the stock, i.e. they sold stock that doesn't exist. Then they expect people who bought the IPO to immediately sell, and then Morgan Stanley buys that stock.
This does two things: It shows buying activity on the open market, raising the price.
And it covers their extra 15% that they sold, so all is well?