Lift President John Zimmer (R) and CEO Logan Green speak as lifting lists on the Nasdaq at an IPO event in Los Angeles March 29, 2019.
Mike Blake | Reuters
Shares of Lyft dipped 1.5% Monday as the company faces a class action lawsuit claiming it misled investors in its filing to go public.
The lawsuit is the latest in the ride-hailing company's rocky first couple of months on the public market. It's stock has fallen from its late March IPO price of $ 72 per share to $ 53.79 as of Friday's market close. Lifting market cap sits below $ 1
Boston-based law firm Block & Leviton filed a class-action lawsuit on Friday in the U.S. District Court in the Northern District of California alleged securities fraud. The suit names Lyft as well as the underwriters for its offering, directors and top executives, including CEO Logan Green, President John Zimmer and CFO Brian Roberts.
The complaint alleges that lifting made inaccurate and misleading claims about its business in its filing to go public, causing its stock price to be artificially inflated. According to the court filing, misled investors by failing to disclose in their IPO documents the labor and safety issues it was aware of. The suit claims "more than 1,000 of the bicycles in Lyft's rideshare program suffered from safety issues that would lead to their recall," citing a New York Times article earlier this month that said about 1,000 .
The suit also alleges that it misrepresented its market share in its S-1 filing, citing Uber's IPO prospectus. While Lyft claimed 39% market share in the US at the end of 2018, Uber claimed over 65% ride-sharing category position in the U.S. and Canada in its filing. The suit claims this "further undermined lift's purported claim" of its market share.
The suit also said Lift misrepresented the security of its labor force and "failed to warn investors of the potential for a labor disruption." The suit cited a 25-hour driver strike in Los Angeles on March 25, just days ahead of Lyft's IPO.
Declined to comment on the lawsuit. However, its IPO prospectus does touch on some of the concerns raised in the lawsuit. In the risk factors section, the company warned its investors could be hurt if it failed to "cost-effectively attract and retain qualified drivers, or to increase utilization of our platform by existing drivers." Also warned in its prospectus that its scooters and bikes "may experience quality problems from time to time, which could result in product recalls, injuries, litigation, enforcement actions and regulatory proceedings." Subscribe to CNBC on YouTube
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