Double trouble for Lyft after share price drop sparks class action lawsuits claiming hype Rideshare company Lyft has been hit with two class action lawsuits by investors who claim the company lied about its market share. The company went public last month, offering 32.5 million shares at a cost of $72 each. An initial spike in the price was followed by a drop, and while the shares recovered to $74 a week later they …
I wish Uber in its IPO venture, nothing but.......
I wouldn't touch their stock with anybody's money, let alone mine.
Lyft seems to be less toxic and aside from the overly litigious US could do well with bicycles and maybe scooters.
From past observation, most companies approaching something like an IPO or buyout tend to try to make themselves look a bit more cuddly. It's buyer beware but I'm sure that would never stop a yank from suing to recover lost gambling money.
>It's buyer beware but I'm sure that would never stop a yank from suing to recover lost gambling money.
Keep thinking the 1%ers belong to any one country. The other 99% of us yanks take it on the chin in our retirement accounts (not per say with Lyft but plenty of other more established examples) with the legal system being sorry innocent until broke with little recourse even with outright fraud.
Is there some place where an analyst has figured out what the real market share is? Just as Lyft could be making up the data in order to sell more stock, Uber could be making some up to tank Lyft's stock price too. Uber have a history of being somewhat less than ethical, and Lyft have a better but not exemplary record, so some verifiable data from an unbiased source might be helpful here.
You can't accurately calculate market share without knowing the competition's internal data as far as the number of rides it is doing. Uber is going to tell Lyft such trade secret information and vice versa. The best either can do is estimate. Of course the estimates may be overly generous on both sides, which is why their estimated totals add up to 104%.
If only we changed corporation laws to ensure they handed over all their private performance data to the public as part of the terms of service for being a corporation.... you know just like they do to all their customers. I'm sure we'd have great fun with the data and you never know it might improve stock market valuations.
That is true about calculating exact market share, but it also means that each company can't really know the right numbers either. Each company may have a great deal of data about their own numbers, but they don't know the specifics for the opposition. That's why there are places that do third-party estimation of this type of thing for investors. I haven't seen if any of those have investigated this, but I would not be surprised to hear that they've been asked. If there is a report about this either already or shortly to be released, its contents will dramatically affect the prospects for this case.
We see the "quality" of these third party estimates every time you look at figures for smartphone and PC market share from IDC and Gartner. Even though most of those sales pass through retail so it should be pretty easy to get since they have relationships with retailers they still differ - except last time when for the first time ever they agreed for the PC market. Coincidence, or did they decide it makes them both look bad so they decided to privately agree upon numbers before publishing them? :)
If they can't even agree closer than a few percent for such simple markets as those, how could they possibly agree in a market where the share for each has no retail component at all and is 100% hidden behind app usage on personal smartphones?
You can't accurately calculate market share without knowing the competition's internal data
Ah, I see. Then only the companies themselves and Google ... and Facebook ... and the CIA .... and the NSA ... and the Russians ... and the Chinese ... and maybe a couple of bored teenagers in Bucharest knows for sure.
But somehow, the stock market will determine a fair price based on no actual data. Capitalism is indeed akin to magic.
I think they are on a hiding to nothing. 4% is well within an acceptable margin of error.
What were they counting? Number of rides, number of customers, money collected, miles driven?
Did Uber and Lyft quote market share over the exact same period? They could only guess at how many rides and how much money their competitors made.
By the way did you know that you can share a ride in a black cab just as easily?
Do either of these companies ever actually "ride share"? It seems to me that they are just taxis. I see little if any evidence that they actually route to take multiple passengers on the same journey who happen to be starting and finishing their journeys in such a way as to be able to "share" a "ride" over some or all of the trip. Certainly the drivers are only going to the destination because the passenger wants to go, so the driver isn't "sharing" either. They are taxis. Even the app based booking wasn't new. Taxi companies had started using booking apps before Uber was invented.
Considering the number of taxis not just in the world, but more specifically in the areas where Uber and Lyft operate, I don't see either of them being able to claim such percentages of the market and still keep a straight face.
Language changes. Ride sharing is used specifically to distinguish these car services from taxis. A taxi is a stranger-to-stranger cash transaction with no third-party surveillance. Taxi driver abuses of passengers in the not-so-distant past caused government regulation to happen. The fact that some cab companies have GPS trackers on their vehicles is not required by the taxi permit. The local taxi commission regulates taxis the same way the police regulate bank robberies: investigating after the fact, not by watching every transaction.
Lyft and I think Uber do have options to book a shared ride where you go with strangers (e.g. they pick up/drop off another person on the way). But most people pick a solo booking. For example this article says 35% of Lyft rides were shared last year: https://mashable.com/article/waze-carpool-app-ride-share-expands/
That particular article also says Waze has started real ride sharing service whereby a commuter can share with a stranger while still driving themselves, in exchange for cash for petrol/gas and presumably being able to use a carpool lane.
The bigger problem with Lyft and Uber is they need to make a profit at some point ...
Their legal fiction claims that ordinary drivers sign up with Über etc and when they are driving somewhere anyway, they turn on the app to get a passenger to share the journey with. Thus the driver doesn’t need a taxi or minicab licence.
That of course does not happen, and Über is completely unsuited to that use case as the passenger you get might want to go somewhere completely different.
The question being why a taxi or minicab needs a license and why a city council gets to administer it ?
The city doesn't limit the number of app developers or require them to have $1M developer medalions.
We just allowed Uber, coincidentally after the mayor who received a $50K donation from the taxi union lost the election. But oddly you have to have the extra license (like the UK one that lets you drive a minibus) to drive for uber - because of safety.
Apparently a regular license is safe enough to drive your kids around, or other people's kids, for free but not safe enough to drive them for money. Ironically us old farts are allowed because we did our test years ago before all this extra lessons, written exams and tougher tests - so we are already safer.
"The question being why a taxi or minicab needs a license and why a city council gets to administer it ?"
If lots of hairdressers started behaving like Sweeney Todd, then hairdressing would be regulated. (And is regulated in some places.) Lots of taxi drivers were crooks and/or dangerous before regulation. Hence regulation.
Well the city has to pay for the roads that they drive on, so that would be a reason for limiting the numbers. London doesn't limit numbers. Anyone who meets the requirements can get a licence, though given that the city is currently over-run with minicabs, which is causing huge congestion problems and slowing down the bus service; perhaps they should.
The town I live in limits taxi numbers, but not minicabs. Über doesn't have a licence here, but they can come here for journeys that start or end in a place where they are licensed. Nevertheless, they operate here illegally, and every week there are around two Über drivers who get prosecuted for driving without a licence and insurance.
The question being why a taxi or minicab needs a license and why a city council gets to administer it ?
There are basically 3 reasons for this:
1) Taxi's can accept rides from random people on the street. Someone can stand on the street and flag a taxi down to accept to get a ride, and a taxi can accept that ride and charge for it. This is versus 'booking' services, such as town cars, limousine hire and so on. In this latter case, prior to the internet, the customer would have to contact the company before hand (telephone, or turn up in person to a booking office (and/or have one of their staff do so)) to book. Therefore the transport company would have more details about who's hiring the service, pick up address, pre-payment of the service for the expected duration, possibly even credit car or bank account details if that's how it's paid for. Therefore a taxi was a much more risky proposition, safety-wise, financially for the driver, and tax/money laundering-wise. Since a taxi has no record of who is picked up, where they are picked up, the danger to passengers is greater, therefore a taxi driver needs stronger vetting/background checks for their license. Also, the driver is more at risk, both physically for the same reasons as passengers, but also because a taxi fare is paid on completion of the ride, rather than an up-front daily booking fee, which could put the passenger in more danger due to fare disputes, after the service is already provided, so the passenger can just do a runner if they disagree (or were intending not to pay at all), and can make for more aggressive drivers due to this possibility of losing payment for a service they have provided. And, since the government have this no knowledge of rides situation, it is easier to take cash and not report it for tax purposes, or to claim more money is going through than it is for money laundering, and so on. All leading to higher taxi driver vetting requirements, and stricter monitoring and regulation of taxi services
2) Taxi companies/operators want to restrict competition so that they can make more money. Since the government is going to be more restrictive of licenses anyway, due to issues noted above, then they can use it to their advantage by putting their finger into the pie and egging on the restrictions, to their advantage with respect to enforcing a monopoly or near-monopoly-like circumstances. This enables them to better control the cost of fares, and to make money for buying and selling the taxi medallions/plates. It serves to keep competition out, and they can gain regulatory capture, that is, where the regulators/licensors work for the benefit of the people they are regulating, the taxis, rather than for the benefit of the customers, the public, which was the purpose of the creation of any such bodies.
3) The government can use it to generate revenue, by selling or even auctioning the medallions/plates. Where I am, in the 90's a new issue of taxi plate (often only done a half dozen at a time and only a couple times a year) would net the government between $200k and $400k per plate. The government also charge large fees for actual taxi driver licences (as opposed to the taxicab operating/owing plate/medallion), annual fees on taxis, and so on. This is an additional benefit to the government on top of the other reasons, passenger safety, making it more difficult to dodge taxes and/or use the service to launder money, etc.
Now along comes ride-sharing services. Technically, under the law (depending on how different jurisdictions define various things that is), ride-sharing services are more akin to the town car, limousine hire-type services, in that they can only take fares who pre-book with the company. The person who takes a lyft, uber, or what have you, has to book with the operator first, providing their personal details, payment methods, and pickup address up-front. Of course, and lot of this is transparent to the user now though, because they create an account with the service, and don't even often have to type the pickup address as GPS can provide it automatically, therefore each time they 'book' their ride-share, in the end from a user perspective its not a whole lot different than flagging down a taxi in the street or going to a taxi-rank, as it is all so automated. Therefore, to the chagrin of regulated taxi services, they - up to now at least - have operated under town car service rules (i.e. less restrictive except for that they are not allowed to be flagged down in the street) while being able to behave much closer - and provide real competition to - taxi cab services. Of course this is changing, as some jurisdictions are starting to regulate them as closer to taxi cab services than town car services.
Hackney carriages tend to be limited, while minicabs are less likely to be limited.
Hackney carriages can tout and be hailed, while minicabs (at least theoretically) have to be arranged in advance. That hailing rule is where there have been court cases about whether the Uber app is effective the same as hailing.
Regulation of Hackney carriages began due to congestion.
I think that the overall numbers are manged (still) with the intention that there is sufficent and stable service. Otherwise it'd swing like animal populations.
Minicabs help provide a different service, of pre-booked rides.
Regulation of both would be for pro-active checking for safety.
There's no actual need to make a profit unless the IPO doesn't happen. The whole point of an IPO is for the initial investors to recover their money plus a bunch of other people's money. Whether the folks they sell their interest in the companies to eventually recover their bet plus profits ... ^h ^h ^h ... correction ... investment is not part of the deal.
Yep, this-
It's an unfortunate black mark against what was initially hailed as a sign that tech stocks are back in fashion.
is perhaps the wrong fashion. So rather than litigating over rideshare numbers, people ought to be wondering why cash burning, loss making tech stocks are fashionable. Like you say, the initial investors (and 'friends' who get initial allocations to quickly dump) cash out, whilst share holders watch the value of their investment fall. And of course the banks handling the IPO make bank.
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Yes. Like the craze in the 80's UK for Endowment Mortgages. "Hey, i just signed an endowment mortgage such that in 20 years the house will be paid for and i will also get £100,000 lump sum."
When it didn't work out that way, (and really, how could it?) they cry foul and want everyone else, including us repaymenters, to give them redress.
Of course, had it worked out that way, they were perfectly willing to share the surpluses with the rest of us, weren't they?
"When it didn't work out that way, (and really, how could it?) they cry foul and want everyone else, including us repaymenters, to give them redress."
Was it really an issue for many? I can't remember hearing about it. All I know know is my mid-1980's 20 year £20k endowment mortgage paid off the debt and gave me a cheque for £8K (yeah, I know, it wasn't a huge mortgage, but I took it out when interest rates were really high and I was very young - by the time the end date was arriving, the mortgage payments were almost chump change per month with the much lower rates)
>Yes. Like the craze in the 80's UK for Endowment Mortgages.
Not really. To participate in an IPO in the US you have to be a 'qualified investor', someone who can demonstrate that they have significant assets to invest and a track record of investing that assumes a reasonable understanding of the risks involved (and maybe an ability to read a prospectus). Endowment Mortgages were retail products of dubious quality that were sold to unsophisticated buyers (because sophisticated buyers would have avoided them like the plague).
I'm not sure who's crying 'foul' over Lyft's IPO but it was pretty obvious that the strike price already carried a hefty premium (i.e. "the IPO share price was drastically overvalued"). I expect Uber to be the same -- the price will have a hefty payday built into it to benefit the principals and the investment bankers but I figure you can only blow a bubble up so far before...
are close to becoming the 21st Century version of the South Sea Bubble.
To invest in either of them and then file suit then the price drops, IMHO, you need to have been head banging to 21st Century Schitzoid Man for an awful long time.
Any investment (or most) is a risk. Playing the stock market is a big risk unless you are careful. IPO's are the playground for the remnants of the Snake Oil Salesman of old. Beware snakes ahead
Yet another bubble, and a definite sense of "deja vu". Neither Lyft nor Uber make profit, or are even projected to - so unless you are speculating (in which case your problem if you get burned) why would any sane, rational person buy their stock?
This is the current owners of venture capitalists, founders, employees etc. dumping essentially worthless equity on the market, which eagerly gobbles it up. These people are incentivised to market their "product" in any which way they can to dumb investors.
Find something better to do with your cash, and leave it to the snakes to fight it out amongst themselves - just say NO !!
Ever wonder where Asda 21.7%, Aldi 8.9%, Sainsbury's 17.9% data comes from? AFAIK each one submits factual monthly sales data to an independent body that crunches the numbers confidentially. It works because those firms are honest and respectable and over time the sales submissions can be verified against published accounts and press releases. No doubt many other industries work the same way.
Can you imagine the pseudo taxi businesses operating that way? The dynamics of "disruption" alone don't lend themselves to such cooperation.
AC been there, done the crunching.
I had a friend with the ambition of being a prostitute. To establish this as a proper career, they figured they should follow this business model: first give it away for free; once demand (ahem) rose, start charging an amount considerably less than the established industry to convert market share into cash flow; then finally to establish demand-based pricing to match the desires of their clientele and file a public offering.
Any guesses how this turned out?
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