The ride-hailing company Lyft was the first U.S tech giant to head to the stock exchange this year. It went public last month, and since then the price of the share kept on decreasing. This has caused a backlash among its investors who are now proposing lawsuits against the company.
On Wednesday, a few investors filed two separate proposed class action lawsuits against the company as per Bloomberg. According to them, the company overvalued its stock price in the initial offerings. Also, the company publicly said that it has a 39 percent share in the ride-hailing market which might be lesser considering the continuous decline in the stock prices.
The company went public just last month with its opening stock price being $72 which was closed on the day at $78.29. It looked then that it’s good to invest in the company’s shares. As of Thursday, the price of the company share was listed at $58.36.
Case filed against Lyft by Investors
A few of the investors did not like the company overvaluing its stocks to grab the money of the investors. As per Bloomberg, there are two class-action lawsuits against Lyft against its officers, underwriters, and directors. The lawsuits were filed on Wednesday (April 17) in San Francisco state court where the company is headquartered.
Lyft went public on March 28, with its stock value gone down by 17 percent since the day of stock launch. The pricing took a downfall as it dropped from the initial offered price of $72 to $59 as of Thursday (April 18). Both lawsuits also claim that the company had not informed the investors that it recalled 1000 bikes to its ridesharing platform.
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Uber’s role in Lyft stock decline
Experts say that Lyft’s stock was affected by Uber’s IPO which gave investors one more horse to bet on to make it a battle in the ride-sharing industry. Lyft’s rival Uber publicly filed IPO with the United States Securities and Exchange Commission last week. It could possibly be the largest IPO offering in US history.
One thing we learned from this is that when private companies go public it provides a chance to have a look at its undisclosed public workings. Lyft in its filing said that it served 30.7 million riders in the United States and Canada in 2018 and that it had 1.9 million drivers last year.
Considering $1.2 trillion expenditure of US consumers on personal transportation every year, it is a huge market to be explored. Both Uber and Lyft are fighting it out to grab the upper hand in the market. Lyft meanwhile said during its launch that it has reached to 95 percent of US customers who use ridesharing platform.
Lyft also encouraged its drivers to buy its shares. The company said it pays its drivers as much as $10,000 and they should invest in it. But it seems like the company is not going to recover from this downhill any time soon. The recent Uber’s IPO filing will make it more difficult to overcome