Once, Lyft’s shareholders filed a lawsuit against the platform for allegedly defrauding them in relation to their earnings report. Read on for more.
Lyft wins lawsuit against it
Thursday is a big day for Lyft. The federal court has dismissed a lawsuit accusing the ride-hailing company of defrauding shareholders by making them wait so long to correct a mistake in an earnings report that caused the platform’s stock price to wildly gyrate.
The federal judge, U.S. District Judge Trina Thompson in San Francisco, stated that shareholders involved in the complaint, a proposed class action, failed to show why it was “fraud” or unreasonable for Lyft to need 42 minutes to fix its earnings release on February 13th, 2024, instead of doing it right away.
The earnings release stated Lyft expected one of its profit margins to expand by five percentage points or 500 basis points in 2024 when it actually expected only 50 basis points.
The ride-hailing platform’s share prices swiftly rose to 67 percent but gave back a huge chunk of those gains after its chief finance officer gave the correct margin later that day on an investor conference call. Seven minutes later, the formal correction was made.
No proof
The shareholders said they waited so long until the correct numbers were set, accusing Lyft of negligence, amounting “to reckless and deliberate indifference to the truth.”
But, the federal judge found no proof of defraud from the San Francisco-based company and its top executives even if they reported an inaccurate profit margin.
The judge based her decision on a similar 2015 case, but involving Yahoo! that had its shareholders wait even longer – six weeks – to correct statements, yet this did not violate anything.
However, Thompson partly sided with the shareholders saying they could amend their complaint. So, there is still a chance they can seek justice.
Lyft has not released an official statement about this issue so far. Robert Finkel, the shareholders’ lawyer, did not want to comment.
What is Lyft?
Lyft is the second-biggest ridesharing company offering ride-hailing services in the United States, following Uber. Aside from ride-hailing, Lyft also offers motorized scooters, bicycle-sharing systems, and rental cars in the country and in select areas in Canada.
The platform sets fares from a dynamic pricing model based on the local supply and demand at the time of the booking. These prices are then quoted to the customer in advance and the platform receives a commission for each booking.
“Driving with Lyft is the perfect way to make money and be there for my family’s needs. I love providing a way to get my passengers from point A to B. Independence is key for me, and I enjoy meeting new people while driving!” said a driver who has been with Lyft since 2017.
Members also get exclusive perks with Lyft’s programs, such as the Lyft Pink program, to enjoy complimentary upgrades to Priority Pickup, exclusive savings, as well as preferential pricing on Lux, XL, and Preferred rides. Members of this program save an average of $23 per month.