Lyft Inc LYFT-Q has reached a $25 million settlement to resolve shareholder claims that the ride-hailing company concealed safety problems, including sexual assaults by drivers, prior to its 2019 initial public offering.
The preliminary all-cash settlement was filed on Thursday with the federal court in Oakland, California, and requires approval by U.S. District Judge Haywood Gilliam Jr.
Lyft denied wrongdoing in agreeing to settle.
The San Francisco-based company raised $2.34 billion in its IPO, becoming the first ride-hailing business to go public.
But its share price fell below the $72 IPO price less than two weeks after trading began on March 29, 2019, and never recovered.
Shareholders accused Lyft of trying to appear more socially responsible than rival Uber Technologies Inc by failing to disclose known problems in its IPO registration statement, and that its share price fell as the problems surfaced.
The shareholders said dozens of people brought claims against Lyft related to driver sexual misconduct in the months after the IPO, an “existential risk” to its brand that should have been disclosed.
Lyft was also accused of concealing braking issues plaguing its bike-share program, which surfaced in April 2019 when the company pulled its electric bike fleet from the New York, San Francisco and Washington, D.C. markets.
Shareholders said Lyft also concealed its dependence on promotions to boost market share, resulting in a price war that saw Uber reclaim market share it had lost.
The shareholders’ lawyers called the settlement an “excellent” result given the “exceedingly unlikely” prospect of recovering up to $777 million of potential damages at trial.
They expect to seek up to $6.25 million from the settlement for legal fees.
Lyft shares closed Thursday down 8.4 per cent at $13.88. They have fallen 78 per cent since last July, as tight labor supply forces greater spending to hire drivers.
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