An error by the rideshare company Lyft that caused shares to skyrocket prompted a note of caution from Securities and Exchange Commission Chair Gary Gensler, Reuters reports.
In a fourth-quarter earnings release last week, Lyft initially forecast that an important profit metric was expected to rise by 500 basis points, or 5%, in 2024. But five minutes after the release, the company informed investors that there had been a typo that added an extra zero to the number and that the actual figure was 50 basis points, amounting to 0.5%.
Shares of Lyft jumped 67% following the report’s release but retreated after the correction.
Gensler was asked about the incident during an appearance on CNBC’s “Squawk Box”, and said companies need to be careful about verifying the information they are disclosing to the public, particularly if they are using artificial intelligence.
“There’s still a responsibility to ensure that you have accurate information that you’re putting out and, with the use of AI, that you have certain guardrails in place,” Gensler said while adding that he could not comment on the specifics of the Lyft matter.
The SEC chair said the incident also underscores the potential for fraud when it comes to information that could affect the markets.
“I really just learned about it, but whether it’s a mistake or whether it’s intentional, because also you could have people trying to defraud the market by putting out fake news releases,” Gensler said.
Lyft CEO David Risher accepted responsibility for the mistake and said the extra zero ended up in the report despite having “thousands of eyes” on it. He emphasized that the error was caught quickly by a team member and an immediate correction was issued.
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
