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Illustration: Lazaro Gamio/Axios

Lyft last Friday was hit with a class action lawsuit by investors in its IPO, who have seen the value of their shares fall precipitously.

My thought bubble: Normally I ignore such cash grabs, as they reek of sour grapes. But this one, with or without merit, highlights a reason why both Lyft and Uber have struggled since going public.

The plaintiffs argue that Lyft hid the ball in several respects:

  1. Failure to disclose that its bike-share program was about to pull 1,000 electric vehicles in New York City over safety concerns. (Unclear that it's material, given that NYC is just one market and the e-bikes were replaced with pedal bikes).
  2. Failure to disclose an increase in surge pricing ahead of the IPO, thus allegedly disincentivizing drivers. (This flies in the face of Lyft's escalating price war with Uber and, even if true, it's not clear how it disincentivized drivers).
  3. Possibility of labor disruptions. (Seriously? You didn't know this? Google much?)
  4. Claiming a 39% market share for North American ride-hail, which the plaintiffs call impossible because Uber allegedly claimed a 65% share.

This last argument about market share discrepancy might just be the result of Uber filing its IPO papers several months after Lyft (i.e., numbers move over time), but it goes to a broader lack of granular transparency by both companies.

For example, we don't know:

  • The exact number of rides by market, broadly or narrowly defined.
  • Per ride revenue, for either the company or the drivers.
  • Number or percentage of discounted rides.

Retailers provide same-store sale data so that investors can better judge the delta between legacy and expansion, but Lyft and Uber don't do anything similar. And when it comes to deeper unit economics, investors are largely left to their own devices, or to trusting amorphous statements about being contribution positive in unspecified large markets.

  • Again, none of this is to validate or invalidate the lawsuit. It's simply to say that it, in part, illustrates a core opacity that I'm told has made some investors stay away, particularly in light of "peak loss" promises.
  • A Lyft spokesman had no comment on the suit.

The bottom line: This is still relatively early days for both companies, and their public fortunes are nowhere near sealed. But when it comes to disclosure, they may need to speed up their maturity.

Go deeper

Felix Salmon, author of Capital
9 mins ago - Economy & Business

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Illustration: Aïda Amer/Axios

Taxing the rich is an idea that's back. An "ultra-millionaire tax" introduced by Elizabeth Warren and other left-wing Democrats this week would raise more than $3 trillion over 10 years, they say, while making the tax system as a whole more fair.

Why it matters: New taxes would be a necessary part of any Democratic plan to redistribute wealth and reduce inequality. But President Biden has more urgent priorities — and Warren's wealth tax in particular faces constitutional obstacles that make it a hard sell.

House passes sweeping election and anti-corruption bill

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The House voted 220-210Wednesday to pass Democrats' expansive election and anti-corruption bill.

Why it matters: Expanding voting access has been a top priority for Democrats for years, but the House passage of the For the People Act (H.R. 1) comes as states across the country consider legislation to rollback voting access in the aftermath of former President Trump's loss.

Updated 7 hours ago - Politics & Policy

House passes George Floyd Justice in Policing Act

Photo: Stephen Maturen via Getty Images

The House voted 220 to 212 on Wednesday evening to pass a policing bill named for George Floyd, the Black man whose death in Minneapolis last year led to nationwide protests against police brutality and racial injustice.

Why it matters: The legislation overhauls qualified immunity for police officers, bans chokeholds at the federal level, prohibits no-knock warrants in federal drug cases and outlaws racial profiling.