Well it was quite long ago I made this so I don't remember the details, but it has an xmomentum and a ymomentum variable that change based on the relationship between the mouse location and the location of the logo, and the logo moves and stretches based on those variables. So if it's not moving and those variables are zero the logo doesn't get stretched. Not sure if that explained it all.
There's also a rotational aspect to it where the outer movieclip rotates and then the inner movieclip, which is the one that is being stretched, always has the opposite rotation to cancel out the outer rotation, or something like that, to get that diagonal stretching going without the logo rotating. This stuff is hard to explain tho.