The Andres Lopez Law Firm

Investors sue major ride-share company

The national ride-share company Lyft is facing a lawsuit in connection with its recent decision to become a publicly traded company. The lawsuit, filed as a class action on behalf or aggrieved investors, stated that the paperwork Lyft filed in order for its stock to be offered to the general public was misleading in several respects.

For example, the lawsuit claimed that Lyft had overstated its market share of the ride-share industry.

Likewise, the lawsuit said that the company's paperwork failed to inform investors that over 1,000 bicycles involved as part of Lyft's broader transportation offerings were involved in safety-related recall. The suit also alleged that Lyft downplayed the possibility of disputes with its own labor force, pointing to a local strike among Lyft drivers in a major city.

The lawsuit may further shake confidence among market investors eying the well-known ride-sharing outfit. Initially, back in late March, Lyft stock was offered at $72 a share. More recently, in the latter part of May, the stock was trading at closer to $55 a share, a decrease of over 20%.

Granted, not every business owner in Coral Springs or other parts of South Florida has to worry about going public any time soon. However, this case still illustrates two important points.

For one, many business disputes start with one side claiming that the other side provided deceptive or misleading information. In many contexts, businesses also have a duty to affirmatively report information, even if the information is not flattering. Failing to do so can expose a business to liability.

Moreover, the case shows how business litigation can rather quickly hurt the reputation and ongoing affairs of an enterprise, even if at the end of the day the enterprise manages to win a court battle. This is one reason why litigation or even the threat of litigation requires a prompt and thorough response.

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