Lyft Inc. (Lyft or the Company) has been on the receiving end of several lawsuits lately. As its stock price has plunged after its initial public offering (IPO) a class action lawsuit has accused the Company of securities fraud. This lawsuit has garnered far more attention than the second, the subject of this blog. The second lawsuit challenged Lyft’s compliance with the American Disabilities Act (ADA). In response to this lawsuit, Lyft had denied it is subject to the ADA. Its court filings claim the Company is really a technology and not a transportation company. Critics of Lyft have argued it could subsidize its drivers to make their vehicles ADA compliant, or it could find more driver who already own ADA compliant vehicles. Both suggestions are more easily said than done.
Lyft has lost approximately $2.0 billion in the last three years. It lost a further $1.1 billion in the first quarter of 2019. To put this in perspective, the IPO raised $2.3 billion. You do not need an MBA to figure out the Company’s ability to take any action is severely constrained in the short run, especially since its IPO is being challenged. The prospectus said the Company expects loses to intensify as it tries to bring new products to market.
While I am a proponent of the ADA, I am reminded of the famous quote from Daniel Webster and Chief Justice John Marshall, “the power to tax involves the power to destroy”. In modern America, we all need to understand the power to regulate is also involves the power to destroy. I am in no way an expert in this industry, but I do understand the economic concept of the short and long run. I hope the ADA matter can be settled in a way that does not unduly burden the company in its fight for survival in the short run while providing for the ADA in the long run. That would be a win-win situation.
Mark Koscinski CPA D.Litt. 