Lyft Off

Lyft Off

February 23, 2024

I’m no stranger to fat-fingering a data entry, but in my case the consequences are usually no worse than getting 11 bunches of bananas in my grocery delivery. Lyft’s recent earnings announcement gaffe, however, garnered a more dramatic reaction.

On February 13, Lyft issued a press release shortly after the US stock market’s close that indicated a 500-basis point (or 5%) increase in estimated gross profit margin. This attracted substantial after-hours trading activity – more than 340,000 shares changed hands at 4:05 pm, nearly eight times the average between open and close that day. But that was nothing compared to the market’s response when, during an earnings call starting at 4:30 pm, Lyft announced a correction to their previous profit growth number – it was in fact 50 basis points, not 500. Traded volume in Lyft’s shares briefly reached nearly 2.9 million.

This episode nicely demonstrates how quickly markets act on new information and reinforces the challenge in outguessing markets.