Lyft’s Blunder: The Power of Words and Patience in a World of Hurry

February 19, 2024

Ever said something that had an immediate and dramatic effect?

Words like “I love you” or “I hate you” can result in relational connection or catastrophe. Even accidental phrases or misspoken remarks can have profound impact.

This goes for stocks too. Last week Lyft mistakenly overstated their product profitability. CNBC reported:

Lyft Chief Financial Officer Erin Brewer said on the earnings call that the company had misstated its margin expansion in the press release. Rather than 500 basis points, or 5%, of growth for 2024, as the company initially indicated, the actual increase will be 50 basis points, or 0.5%, Brewer said.1

Oopsie.

The initial statement caused the stock to skyrocket from around $12 to $20 a share after hours. Once the mistake was admitted LYFT immediately plummeted back down near where it was trading before the inaccurate report. Bloomberg columnist Matt Levine nails down the specifics:

The stock closed yesterday at $12.13, finished the after-hours session at about $14.05 and opened today at $14.98. (It was trading higher at noon.) After the press release, but before the correction on the call, it got as high as $20.25. Some 21 million shares traded at prices above $15; 1 million traded at prices above $20. If you bought a million shares at $20 when it was worth $15, because of a typo, you might be, you know, $5 million worth of aggrieved. If you bought 21 million shares at incorrect prices because of a typo, you’d be tens of millions of dollars of aggrieved.2

Sticks and stones may break my bones, but words can make or lose you money quick like.

Well, that didn’t rhyme very well.

King Solomon said life and death was in the power of the tongue and another common proverb says the pen is mightier than the sword, so we shouldn’t be surprised when the value of a stock is wielded by the pen of a press release and the correction of a CFO.

The point is: in our social media saturated and never-ending news world, words—whether true or false, spoken inadvertently or intentionally—have real world effects. Overreactions occur, emotions run high, and conclusions when drawn hastily, may require later corrections after more careful inspection.

Be mindful of who you listen to.

Especially during an election year, remember that the short- and long-term effects of words on various matters, including investment portfolios, may differ greatly.

Words matter.

Listen well, evaluate wisely, and consider even just a smidge of patience as an alternative to the contemporary pressure to hurry.

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Sources:

  1. Lyft shares pull way back after CFO corrects major earnings release error
  2. Matt Levine, “Lyft Had a Typo”, Bloomberg Newsletter “Money Stuff”, 2/14/24.