Lyft’s stock inched lower in trading Monday (May 20) after investors filed a class action lawsuit against the ride-hailing startup.
According to a report in CNBC, citing the lawsuit, investors contend Lyft misled them in its initial public offering (IPO) with the Securities and Exchange Commission. The the class action lawsuit, filed Friday (May 17) by Boston-based law firm Block & Leviton in U.S. District Court in the Northern District of California, contends Lyft committed securities fraud. In addition to Lyft, underwriters, directors, and executives including CEO Logan Green, President John Zimmer and CFO Brian Roberts were named in the suit, reported CNBC.
The investors contend in the lawsuit that Lyft made misleading and false statements about its business in the IPO filing, which drove the stock higher. Lyft reportedly didn’t disclose known safety issues with its bicycle rideshare program. The lawsuit contends Lyft didn’t disclose that more than 1,000 of the bicycles in its rideshare program had safety issues that would result in recalls.
The investors also contend Lyft overinflated its market share in its IPO filing. Citing Uber’s IPO filing, the investors said Lyft claimed to have 39 percent market share in the U.S. but Uber stated in its IPO filing it has more than 65 market share in the U.S. and Canada. That, says the lawsuit “further undermined Lyft’s purported claim” of market share. On top of that, the lawsuit contends Lyft failed to warn investors of the chance of a labor dispute, pointing to a 25-hour strike by drivers in Los Angeles ahead of its IPO at the end of March.
The lawsuit is just the latest of bad news to hit Lyft since it went public. The stock is way off its IPO price, with its market capitalization now around $16 billion. That is lower than the $20 billion it was valued at when its IPO priced.