A sign for the Lyft ride share pick up area at Los Angeles International Airport, in Los Angeles, Calif., on Aug. 20, 2020.ROBYN BECK
Lyft’s LYFT-Q forecast error that sent shares into a tizzy overnight may invite regulatory or legal scrutiny, analysts and experts said on Wednesday, overshadowing its solid quarter and forecast.
An error in its earnings statement caused a brief 67 per cent surge in shares before a clarification from Chief Financial Officer Erin Brewer in a conference call with analysts.
Lyft said incorrectly that a key margin metric was expected to rise by 500 basis points this year, but Brewer later corrected that forecast to an increase of 50 basis points.
About 48 million shares traded after-hours Tuesday, more than triple the usual daily regular-session volume in the stock.
“The SEC will probably review the situation given the scale of the share price movement upon release of the original results and Lyft could potentially be fined,” said Dan Coatsworth, an investment analyst at AJ Bell.
Analysts said the surge could have included significant short covering from hedge funds. Lyft had short interest of $566.1-million, or 13.1 per cent of its free float shares, as of Feb. 12, according to data and analytics firm Ortex.
Still, shares were up 34 per cent on Wednesday, setting it on course to add more than $1.65-billion to its market value.
Whether the company could face legal liability is unclear, experts said.
“Since the error relates to a forecast, it’s likely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead,” said Bobby Reddy, professor of corporate law and governance at the University of Cambridge.
CEO David Risher’s push for aggressive restructuring has helped the company cut total costs last year by 12 per cent compared with a 28 per cent increase in expenses in 2022.
Lyft was trading at 20.27 times its 12-month forward earnings estimates compared with Uber’s 49.75.
Shares of rival Uber UBER-N gained nearly 9 per cent after the company said it would buy back up to $7-billion worth of company shares for the first time ever.
Thousands of drivers for ride-sharing platforms Uber, Lyft and food delivery app DoorDash are expected to go on strike across the United States on Valentine’s Day for fair pay, drivers’ groups said earlier this week.