Lyft Stock Recoils, But COO’s Shock Departure Has a Silver Lining

Journalist:
July 29, 2019

Lyft’s Chief Operating Officer, Jon McNeill, is leaving the company after only 18 months on the job. Lyft stock slid 2.27% on the news.

3 Possible Reasons Why the COO Flew the Coop

For senior management to depart a position as necessary as operations after only 18 months, there are usually only three possible explanations.

The first explanation is that Jon McNeill took the company as far as he believed his skills would take it. McNeill is a young guy, and he’s been with multiple companies, including Tesla.

It may be that Jon McNeill is the kind of guy who comes into a company, optimizes its operations, helps to grow sales, vests stock options, and moves on.

The second explanation is that Jon McNeill didn’t fit in with the Lyft company culture. This seems unlikely, given his experience and reputation. It seems odd that he would have taken the job at Lyft without having a solid understanding of the culture to begin with.

The third explanation is that Lyft is an operational and cultural disaster. Yet, when it comes to rideshare, Uber has been the problem child.

Uber’s reputation has cleaned up since Travis Kalanick left. Lyft has never received the kind of bad press that Uber did, although its car rental program is not a high point.

It seems likely that Jon McNeill never intended to spend much time at Lyft. He also can’t be pleased that Lyft stock has gone nowhere, while the company hides important data.

The Good News for Lyft

This is arguably a good sign for Lyft.

It may mean that, from an operational standpoint, Lyft doesn’t need some kind of huge overhaul. It may be that Jon McNeill’s efforts have resulted in great success for driver recruitment, driver retention, and customer satisfaction.

Certainly, Lyft and Uber are equivalent and effectively commoditized. At this point, McNeill’s further services may not make any material difference with respect to the company, so he chose to move on.

This is also why his departure may be a bad sign for Lyft.

The Bad News for Lyft

Lyft and Uber are locked in a never-ending price war. | Source: REUTERS/Lucy Nicholson

The struggle that both Lyft and Uber now face is this very idea of commoditization, while also trying to battle over market share.

What we’ve learned from their respective prospectuses and earnings reports are that they are both subsidizing rides. The battle for market share means a price war.

A race to the bottom is not only likely, but inevitable, and self-driving cars won’t change a thing.

The whole reason for the taxi medallion system in New York City came as a result of this exact situation.

Back then, taxis were unregulated. So they could operate without licenses, and charge whatever they wanted. These “gypsy cabs” would often get into fights with each other on the streets of New York City over fares.

As a result of price wars pushing fares to rock-bottom, the taxicabs became perpetually unsafe, because their drivers didn’t have enough money to properly maintain their vehicles.

This will all come to pass with rideshare drivers in the long term. In the meantime, however, Uber and Lyft are going to be struggling with cash burn regardless of who their respective chief operating officers are.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Last modified (UTC): July 29, 2019 17:42

Lawrence Meyers @captsmedley

Lawrence Meyers has published over 2,500 articles on finance and policy at outlets including Breitbart.com, Investorplace, WyattResearch, LearnBonds, Lifezette.com, TownHall.com, U.S. News & World Report, and The New York Observer. He hails from New York City in the USA.