Lyft Wins Dismissal of Shareholder Lawsuit Over Earnings Report Error
Thursday, Jan 16, 2025 4:52 pm ET
1min read Lyft Inc. has secured a significant victory in its ongoing legal battle with shareholders who sued the ride-sharing company over an earnings report error. On Tuesday, a federal judge dismissed the proposed class-action lawsuit, which alleged that Lyft had committed securities fraud by misrepresenting its earnings margin in a February 13 press release.
The lawsuit, filed by shareholder Yuan Chen, claimed that Lyft had negligently or recklessly misstated its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expansion in the press release. The press release initially stated a 500 basis point expansion, but it was later corrected to a 50 basis point expansion. The error caused Lyft's stock price to surge by 67% in a half-hour before plummeting when the correction was made.
In his ruling, Judge Haywood S. Gilliam Jr. of the U.S. District Court for the Northern District of California found that the shareholders had not provided sufficient evidence to support their claims of securities fraud. The judge noted that Lyft had promptly corrected the error and that the misrepresentation was not intentional.
The dismissal of the lawsuit is a relief for Lyft, which has been grappling with the fallout from the earnings report error. The company has since taken steps to improve its internal controls and ensure the accuracy of its financial reporting. In an interview with Bloomberg Television, Lyft CEO David Risher took responsibility for the error and apologized for the mistake.
The lawsuit was one of several legal challenges Lyft has faced in recent years. In 2021, the company agreed to pay a $2.1 million civil penalty to settle charges by the Federal Trade Commission (FTC) that it had made deceptive earnings claims about driver pay. Additionally, Lyft has faced criticism and regulatory scrutiny over its handling of sexual assault and safety issues within its platform.
Despite these challenges, Lyft has continued to grow and expand its services. The company reported a net loss of $114 million in the first quarter of 2024, but its revenue increased by 15% year-over-year. Lyft's stock price has also rebounded from the earnings report error, closing at $12.92 on May 6, 2024, up from its post-correction low of $12.13.
The dismissal of the shareholder lawsuit over the earnings report error is a positive development for Lyft, as the company continues to navigate the complex and evolving landscape of the ride-sharing industry. As Lyft looks to the future, it will be crucial for the company to maintain strong internal controls and transparency in its financial reporting to avoid similar incidents and maintain the trust of its investors and customers.
Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.
