A typographical error in Lyft’s earnings report released Tuesday sent the ride-sharing platform’s stock soaring before the company announced the corrected figures and issued a revised filing.
Lyft’s initial report projected that one of its profit margin metrics was expected to grow by 500 basis points – a 5 percentage point increase – this year. This particular financial metric, the adjusted earnings margin as a percentage of bookings, effectively signals how large of a profit Lyft receives through its bookings.
That sent Lyft’s stock soaring by about 67% until about an hour after the earnings report was released, when Lyft’s chief financial officer, Erin Brewer, clarified that the forecast meant to signal an increase of 50 basis points, or 0.5 percentage points. Lyft issued an 8-K to correct and flag the clerical error in the initial report.
Despite the error and subsequent correction, Lyft’s strong earnings report included a forecast for better-than-anticipated bookings in the current quarter and the company said it expects to be cash flow-positive this year. That kept the positive momentum going for Lyft’s stock into Wednesday’s trading session even after the corrected report was filed.
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Lyft’s stock spiked to $17.55 a share during after-hours trading Tuesday following the release of the initial, erroneous report after it closed at $12.13 a share. Following the correction, it declined into the $14 range on Tuesday night.
The stock surged Wednesday, hitting $16.65 a share, or a gain of 37.26%, during morning trading – a level that would be the largest percent increase on record for the company.
Lyft’s stock was trading around $15.82 in midafternoon – an increase of 30.4% on the day.
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About 48 million shares were traded after-hours Tuesday, an amount more than triple the usual daily regular-session volume for Lyft’s stock.
While Lyft has issued its corrected filing, the typo may result in some regulatory scrutiny of the error and the market’s reaction to it, though it’s unclear whether the company will face any legal liability.
“The [Securities and Exchange Commission] will probably review the situation given the scale of the share price movement upon release of the original results and Lyft could potentially be fined,” Dan Coatsworth, an investment analyst at AJ Bell, told Reuters.
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Bobby Reddy, professor of corporate law and governance at the University of Cambridge, told Reuters, “Since the error relates to a forecast, it’s unlikely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead.”
Reuters contributed to this report.