Lyft is confronted with a securities fraud lawsuit from shareholders after a recent earnings release blunder triggered a rollercoaster ride in the ride-sharing company’s stock price.
In a proposed class action, shareholders allege that Lyft made a careless error on Feb. 13 by initially stating that one of its profit margins would expand by 500 basis points in 2024, causing a surge in stock price, when it actually expected an expansion of 50 basis points.
The mistake, revealed at 4:05 p.m. EST, led to a buying frenzy, causing Lyft’s share price to surge by 67% in just half an hour.
Lyft CEO David Risher acknowledged the error, stating, “It was a bad error, and that’s on me,” during a CNBC interview the next day.
Shareholders claim that most of the gains evaporated after CFO Erin Brewer provided the correct margin forecast at 4:47 p.m. on an investor conference call. They assert that Lyft took another seven minutes to officially admit the error.
The lawsuit alleges that the misrepresentation went beyond negligence, amounting to “reckless indifference to the truth.”
Lyft has not immediately responded to requests for comment.
The legal action seeks damages for investors who purchased Lyft shares at “inflated prices” between 4:05 p.m. and 4:51 p.m. on Feb. 13, during which Lyft’s market value experienced a $3.2 billion rise, followed by a $2.9 billion decline.
Shareholders also claim that Lyft’s CEO and CFO were motivated to delay rectifying the mistake to enhance their stock-based performance bonuses, as short-sellers covering positions contributed to the stock price volatility.
The case is filed in San Francisco federal court as Chen v. Lyft Inc et al, U.S. District Court, Northern District of California, No. 24-01330.
