US: Investors sue Lyft over overhyped IPO

Lyft is being sued by some investors who say the company exaggerated its market position during its IPO in March, which they say led to a shedding of stock value.

Bloomberg reported there are two class-action lawsuits against the company, as well as against underwriters, officers and directors. The lawsuits were filed on Wednesday, April 17, in San Francisco.

Lyft went public on March 28, and its stock’s value has gone down 17% since that day. Its offering price was US$72, but it has dropped to the US$59 range. The stock was affected by Uber’s own IPO, which gave investors a different horse to bet on in the ridesharing industry.

The suing investors say Lyft overinflated its value in a prospectus, in which it said it had 39% market share. Both suits also claim the company didn’t tell investors that it had recalled 1,000 bikes in its rideshare endeavor.

PYMNTS’ Karen Webster wrote about the difference between the two companies on Monday, April 15. As she noted, Uber filed its S-1 on April 11, two weeks after the Lyft IPO. Lyft’s stock was trading at US$59.90 a share by the close of business on April 12, and it was 20% off its high of US$75 at the end of the first day of trading.

“Lyft’s market cap was a bit lighter by the end of the day on April 12, too: $17 billion versus the $23 billion it enjoyed, albeit briefly, on its first day as a public company,” she noted.

“Pundits attribute the drop to overzealous investors who may have since sobered up, perhaps even more quickly after having gotten a good look at the financial performance of the global ridesharing goliath that defined the space,” Webster said. “That look has many of those same pundits now fretting over how to value both adequately, since apple-to-apple comparisons, they say, are hard.”

Both Uber and Lyft are in the same business, but that’s where the similarities stop.

“Lyft is a self-described peer-to-peer marketplace focused on ‘revolutionizing transportation’ and reducing traffic congestion in cities. For Uber, transportation is a platform feature that is central to its business, but is not its end game,” Webster wrote.

The unique thing about Lyft’s marketplace of drivers, she pointed out, is that “transportation alternatives give consumers access to a variety of cost-effective transportation options, so they don’t have to buy cars or drive them as much.”

Uber’s platform helps consumers do that, while also “enabling adjacent businesses to solve their own logistics frictions,” Webster said.