Don’t confuse the investors: just when you think Lyft’s disclosure can’t get worse
For those of you who had better things to do than listen to the Lyft 1Q conference call all the way to the end, you might have missed the most amazing thing. When asked why Lyft will no longer be disclosing either the number of rides or gross bookings, management’s answer was they are withholding this rather critical information to prevent “investor confusion”. You see, for Lyft’s immaterially small bikes and scooters business, gross bookings and revenue are the same number because Lyft buys and manages the hardware themselves. But for ridesharing, revenue is gross bookings less the share paid to drivers. Figures for bikes and scooters are also undisclosed! Super confusing, right? Why would investors want to know the trends in gross bookings per ride, or the take rates, or the mix of rides between cars bikes and scooters, or gross bookings per rider? Better to just forget all that stuff and not be confused. So rather than giving the investors who just handed over more than $2 billion to Lyft additional transparency into the company by breaking out scooters and bikes, they are going the other way and making the core ridesharing business even more difficult to analyze on its own at the unit level, and making the consolidated entity with multiple lines of business more opaque. This very same management team on this very same telephone call did reveal one number investors must have been thrilled about: $895 million in stock-based compensation for management in 1Q. So management paid themselves almost a billion dollars for getting the IPO done and then at the very first opportunity they took their terrible disclosure and made it even worse for reasons that are absolutely insulting to investors, both professional and amateur. The stock below $54 today reflects this. So why is Lyft management so stingy with the key operating metrics? Well look what happens when investors get a look at the details. A big deal (but maybe not big enough) has been made about Carl Icahn selling his entire position in Lyft, worth roughly half a billion dollars, to George Soros in the immediate run-up to the IPO. Carl Icahn had a big position in Lyft and a board seat and he wasn’t “confused” about the numbers he saw. Reports differ – maybe the trade was done at $60 per share or $55 or some other number, maybe there was structure or maybe there wasn’t – but what we know is that a very sophisticated investor with access to all the metrics the public investors will no longer see was a seller of his entire position without even waiting around to see how the IPO performed. Better to keep confusion like that to a minimum going forward.