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Lyft Stock: Earnings Typo Pumped Share Price by 60% Causing Cries of Market Manipulation?

Last Updated February 14, 2024 2:23 PM
James Morales
Last Updated February 14, 2024 2:23 PM

Key Takeaways

  • A mistake in Lyft’s annual earnings report inflated a key growth metric.
  • The typo caused Lyft stock to soar by more than 60% in after-hours trading.
  • Could the ride-hailing firm be guilty of market manipulation?

Typos can sometimes be embarrassing but are usually harmless. However, they can move markets when the mistake is in a company’s annual earnings report, which is exactly what happened to Lyft on Tuesday, February 13.

Thanks to an erroneous extra zero which overstated the ride-hailing company’s 2024 forecast for a key growth metric by a factor of 10, Lyft stock pumped by over 60% in after-hours trading. The typo appears to have been an innocent mistake, but could the firm still be guilty of market manipulation?

Extra Zero Sends Lyft Share Price Soaring

In the ride-hailing business, a company’s bottom line is closely related to how many bookings it receives. Accordingly, a closely tracked metric for firms like Uber and Lyft is profit margin as a percentage of gross bookings.

By adding an extra zero to the figure, Lyft implied that it expected to increase the cut it takes from bookings by 500 basis points in 2024. 

A Drop in Lyfts Share Price

During a subsequent earnings call, Lyft Chief Financial Officer (CFO) Erin Brewer said the company was expecting just a 50 basis-point expansion. When asked by an analyst to reconcile the two figures, she acknowledged that the number published in the earlier release was a mistake.

Having climbed as high as $19.70 in the wake of the misreported forecast, Lyft’s share price fell back down following Brewer’s correction and traded between $14 and $14.30 for the rest of the night.

Did Lyft Break the Rules?

In the US, where Lyft is incorporated, the Securities and Exchange Commission  (SEC) requires information regarding quarterly earnings from all publicly listed companies. 

Misrepresenting earnings, even by mistake, can lead to hefty fines and it is not unusual for accounting errors to result in multi-million dollar penalties.

Just last month, the SEC itself caused wild fluctuations in the Bitcoin market after its Twitter account was hacked . Mistakes happen. From typos to lax social media security, even professionals slip up sometimes. But they don’t always need to be penalized.

Ultimately, Lyft’s slip-up occurred in a press release shared with investors, not the disclosure statement it is required to submit to the SEC. What’s more, because the firm repealed the inaccurate statement before trading opened the next day, it is probably safe from market manipulation charges.

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