American Ride-sharing company Lyft has been hit with two class action lawsuits by investors who claim the company lied about its market share.
The company, who competes directly with Uber in the states, launched it's IPO last month, offering 32.5 million shares at a cost of $72(£55.40). The move to go public started well with an initial spike in the price, but a drop soon followed. A volatile market then pushed the share price back up to $74(£56.90). A week later the shares took another big drop to $57(£43.80) - a 23% fall - and the timing couldn't be any worse with Uber releasing its own prospectus for an initial public offering (IPO).
Questions have now been raised surrounding both Lyft’s and Uber's market share claims. In its prospectus, Uber claimed it had a 65 per cent market share and Lyft stated it had a 39 per cent market share – well those figures don't add up! You don't have to be a mathematic genius to work out that those percentages add up to 104.
Both lawsuits from investors Brian Hinson and Frederic Lande touch on two main points within Lyft's IPO prospectus. One being that according to the ride-sharing firm, it had a 22 per cent market share in December 2016 and that had increased to 39 per cent in December 2018 which now may be considered misleading considering Uber claim to have a 65 per cent market share.
In addition, it emerged that Lyft was recalling 1,000 of its bicycles due to injuries and other safety issues, representing 15 per cent of its bike-sharing fleet. In its IPO prospectus, Lyft made significant play of the fact that it has what it claimed was 75 per cent of the bike share market and it expected the size and value of that market to increase - well it's just decreased by 15 per cent.
Both lawsuits claim that Lyft and its offices, directors and underwriters had put "materially false and misleading statements" into its prospectus as well as omitted relevant information.
These two points accompanied by a price fall down to $57(£43.80) both cases bare some weight.
Uber is up next and no doubt everyone will be watching with keen interest. Uber has been massively overpriced in private deals for years and the company somewhat thinks that it doesn't need to actually make money to warrant a successful place in the public market.
Image: Source; Flickr
Image: Author; Quinn Dombroski