Lyft's Clerical Error: A Deep Dive into the 500 BPS Blunder
Filing mishaps rarely make the headlines, but Lyft's recent clerical error concerning its adjusted EBITDA margin captured significant attention. The incident raises questions regarding oversight, potential confusion about basis point conversions, or a simple input mistake in financial reporting.
The 500 BPS Blunder: How Lyft's Error Unfolded
In its press release detailing FY23 results, Lyft's 'Directional Commentary' section incorrectly stated an adjusted EBITDA margin expansion of 500 bps year-over-year. The correct figure, however, was 50 bps. This discrepancy was clarified by Lyft's CFO during the subsequent earnings call approximately 30 minutes later.
Lyft, like many publicly traded companies, released its report after standard market hours on Tuesday, February 13th, at 4:06 p.m. EST. The associated earnings call began at 4:30 p.m. EST. Approximately 20 minutes into the call, the CFO issued the correction regarding the adjusted EBITDA margin expansion.
The Market Reacts: Share Price Volatility
Predictably, in thin after-market trading, Lyft's stock price experienced significant volatility. It briefly approached $20 before the correction was announced, ultimately closing the trading session in the $14 range. The following day, the stock opened at nearly $15 and was trading around $19 at the time of writing, prior to the market opening on Friday.
Disclosure and Materiality: Legal Implications
Lyft promptly corrected the press release on its investor relations website following the earnings call. Simultaneously, an amended statement was filed with the SEC at approximately 5:51 p.m. EST on the same day. This filing included an explanation referencing a 'clerical error.' Due to standard SEC filing system processes, this amended filing was officially published and legally considered filed on the subsequent business day.
Errors can occur in securities filings, even those subject to elevated levels of scrutiny. The primary questions for the SEC and Lyft's legal team revolve around two aspects: whether the mistake was material, and if the company took sufficient, timely steps to inform investors. The stock market reaction strongly suggests the initial error was material, as investors clearly responded to the reported adjusted EBITDA margin. The incorrect figure would have represented Lyft's highest-ever adjusted EBITDA margin and a significant improvement.
The adequacy and timeliness of the company's corrective actions remain under scrutiny. Disclosing the correction solely during an earnings call may prove insufficient if the official legal filing is completed on a subsequent business day, potentially raising concerns about investor awareness and equitable information dissemination.
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.