Lyft has been sued by shareholders for securities fraud after a mistake in a recent earnings release about a key profit metric sent the ride-sharing company’s stock price on a wild ride up, and then down.
In a proposed class action on Tuesday, shareholders said Lyft was careless in initially saying on Feb. 13 that one of its profit margins would expand in 2024 by 500 basis points, or 5 percentage points, when it actually expected 50 basis points.
The mistake disclosed at 4:05 p.m. EST triggered a buying frenzy that caused Lyft’s share price to rise 67% in a half-hour.
“It was a bad error, and that’s on me,” Chief Executive David Risher told CNBC the next day.
Shareholders said the stock shed most of the gains after Chief Financial Officer Erin Brewer gave the correct margin forecast at 4:47 p.m. on an investor conference call. They said Lyft waited another seven minutes to formally admit the error.
“The misrepresentation was so apparent that it went beyond mere negligence, and amounted to a reckless indifference to the truth,” the complaint filed in San Francisco federal court said.
Lyft did not immediately respond on Wednesday to requests for comment.
The lawsuit seeks damages for investors who bought Lyft shares at “inflated prices” between 4:05 p.m. and 4:51 p.m. on Feb. 13.
During that period, Lyft’s market value rose as much as $3.2 billion, and then shed roughly $2.9 billion of that increase.
Shareholders also said Risher and Brewer were “motivated” to delay fixing the mistake in order to boost their stock-based performance bonuses, as investors who had bet Lyft’s share price would fall were forced to cover their short positions.
About 13% of Lyft’s stock had been shorted as of Jan. 31, compared with 3% at larger rival Uber.
The case is Chen v Lyft Inc et al, U.S. District Court, Northern District of California, No. 24-01330.