Lyft Scores Dismissal of Class Action Lawsuit over a Typo in Earnings Release

US District Judge Trina Thompson in San Francisco dismissed a shareholder class action lawsuit against Lyft (LYFT) that accused the ride-sharing company of defrauding investors by failing to promptly correct a typo in its Q4 2023 earnings press release, causing volatile movements in the stock. Lyft shares were up more than 1% in Friday’s pre-market trading as of writing.

More on the Class Action Lawsuit Against Lyft

Lyft announced its results for the fourth quarter of Fiscal 2023 and the full year on February 13, 2024, at 4:05 p.m. EST. The company’s press release initially stated that the Fiscal 2024 adjusted EBITDA margin (calculated as a percentage of gross bookings) is expected to expand by about 500 basis points year-over-year. However, the correct number was 50 basis points.

Following the initial release, LYFT stock rallied 67% but pared most of the gains after the company’s CFO mentioned the correct margin expansion estimate at 4:47 pm during the earnings call. The company then made a formal correction in the press release seven minutes later. Shareholders accused the company of being negligent and reckless and showing deliberate indifference to the truth. The lawsuit sought damages for investors who bought Lyft stock at allegedly inflated prices between 4:05 p.m. and 4:51 p.m. on February 13, 2024.

However, the federal judge found no proof that the company or its top executives had the intention to defraud anyone by issuing an incorrect profit margin guidance. Nonetheless, Judge Thompson said that the shareholders could try to amend their complaint.

Is Lyft Stock a Buy, Sell, or Hold?

Wall Street has a Moderate Buy consensus rating on Lyft stock based on eight Buys and 23 Holds. The average LYFT stock price target of $19.04 implies 40% upside potential. Shares have advanced about 7% over the past year.

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