Fat Finger Disclosures: Lyft's Headline Grabbing 'Clerical Error'
| 3 min read | by Alex Hoffmann
Filing mishaps rarely make the headlines, but Lyft's most recent "clerical error" did. It's still unclear whether its a case of oversight, confusion about the conversion of percentages to basis points, or a fat finger error.
In their most recent press release on the FY23 results, the company included a "Directional Commentary" section where it mentions an adjusted EBITDA margin expansion since the start of this year by 500 bps y/y. BUT: Just a typo; the actual number is 50bps, as corrected by the CFO on the earnings call half an hour later.
The company - like so many others - filed their report after hours (at 4.06 pm on Tuesday, Feb 13th) with an earnings call hosted at 4.30 pm the same day. After about 20 minutes on the call, the CFO corrected the most recent margin expansion. Predictably, in thin after-market trading, the stock price did a bit of a rollercoaster, almost touching $20 before the correction before closing in the $14 range. It's opened the next day at just shy of $15 and is at around $19 at the time of writing before the market opens on Friday.
The company quietly corrected the release on its investor relations website almost immediately after the earnings call. It also filed an amended statement with the SEC at around 5.51 pm the same day, with an oblique explanation of a "clerical error." Due to the quirks of the SEC's filing system, that filing was only published the following day and was also considered filed by then for all legal intents and purposes.
It's possible to make mistakes in securities filings, even those that go through elevated levels of scrutiny. Quite frankly, we are surprised this doesn't happen more often. However, the question that the SEC and the company's lawyers will have a view on is whether (a) the mistake is material and (b) the company has done enough to make investors aware of their mistake.
It seems apparent that the mistake was material. While not legally sufficient to answer this, the stock market reaction suggests that investors cared about the number. It would also be the highest level of Adjusted EBITDA margin the company's ever had and a massive improvement.
However, whether the company has taken sufficient, timely steps to advise investors of its mistake is unclear. Just letting you know about it on an earnings call may prove insufficient if you only legally file the correction the next business day.
Alex is the co-founder and CEO of Marvin Labs. Prior to that, he spent five years in credit structuring and investments at Credit Suisse. He also spent six years as co-founder and CTO at TNX Logistics, which exited via a trade sale. In addition, Alex spent three years in special-situation investments at SIG-i Capital.