By Jonathan Stempel
(Reuters) -A federal judge on Thursday dismissed a lawsuit accusing Lyft of defrauding shareholders by waiting too long to correct a mistake in an earnings release that caused the ride-sharing company’s stock price to gyrate wildly.
U.S. District Judge Trina Thompson in San Francisco said shareholders in the proposed class action did not show why it was unreasonable for Lyft to need 42 minutes to fix its Feb. 13, 2024 release, instead of doing it immediately.
The release at 4:05 p.m. EST (2105 GMT) said Lyft expected one of its profit margins to expand by 500 basis points, or 5 percentage points, in 2024 when it actually expected 50 basis points.
Lyft’s share price quickly rose 67%, but gave back most of those gains after the company’s chief financial officer gave the correct margin at 4:47 p.m. on an investor conference call. A formal correction followed seven minutes later.
Shareholders said Lyft’s mistake went beyond negligence and amounted to reckless and deliberate indifference to the truth.
But the judge found no proof that the San Francisco-based company and its top executives intended to defraud anyone by reporting an incorrect profit margin.
She also said the federal appeals court in San Francisco, in a 2015 case involving Internet services provider Yahoo, said waiting six weeks to correct statements would not violate any duty to correct.
Robert Finkel, a lawyer for the shareholders, declined to comment. Lyft did not immediately respond to requests for comment.
Thompson said the shareholders can try to amend their complaint.
The lawsuit sought damages for investors who bought Lyft shares at allegedly inflated prices between 4:05 p.m. and 4:51 p.m. on Feb. 13, 2024.
During that period, Lyft’s market value rose as much as $3.2 billion, and then shed about $2.9 billion of that increase.
Approximately 13% of Lyft’s stock had been shorted as of Jan. 31, compared with 3% at rival Uber.
The case is Chen v Lyft Inc et al, U.S. District Court, Northern District of California, No. 24-01330.
(Reporting by Jonathan Stempel in New York; editing by Diane Craft)
