Capital Calls: Lyft

- Lyft

- CK Hutchison

Wild ride. Lyft and its shareholders have some lessons to learn from the ridesharing company’s gross forecast error. In a press release on Tuesday, the $5 billion U.S.-listed company incorrectly stated that its 2024 EBITDA margin as a percentage of gross bookings would rise by 500 basis points, sending shares up 60% after market close. The mistake was not reflected until roughly 30 minutes later, when an analyst question prompted Chief Financial Officer Erin Brewer to clarify the profit margin would only rise by 50 basis points, forcing the stock to give up some of its earlier gains.

Lyft obviously needs to better proofread its own statements. But the blunder also exposes investors’ lazy reliance on automatic trading. The company published its results after regular trading hours, when most of the trades are computers’ reaction to new information. Automated-trading makes up about half of normal U.S. stock trading volumes during regular trading hours, according to Nasdaq.

Lyft’s decision to switch to new financial metrics probably added to the confusion. In the first two quarters of 2023, the company had released guidance on adjusted EBITDA margin as a percentage of revenue. But it introduced EBITDA on gross bookings as a key metric after CEO David Risher took the rein in April. To avoid being so miserably wrong-footed, investors need to start doing more of their own thinking. (By Karen Kwok)

When in Rome. CK Hutchison will have to dial back into the telco M&A party in Italy. The Hong Kong conglomerate’s plan to spin off the wholesale telecommunications business at its Italian subsidiary, Wind Tre, has fallen apart. Fast-tracking a different deal in the hyper-competitive Italian market is now boss Victor Li’s priority.

The 3.4 billion euro deal, announced in May, was part of CK Hutch’s asset-light strategy for Wind Tre. By carving out the wholesale operations and network equipment and selling control to Sweden’s EQT Infrastructure, the mobile operator would have freed up resources to better compete against Vodafone, Iliad, Swisscom’s Fastweb and Telecom Italia. An intense price war is eroding profitability in the five-player market, where average revenue per user is among the lowest in Europe.

Consolidation looms. France’s Iliad has unsuccessfully approached Vodafone at least twice about an Italian merger; the latter has also been considering some form of combination with Fastweb in the country, according to media reports. CK Hutchison has only held “exploratory talks” with Fastweb and Iliad, Bloomberg reported in December.

Li has reason to pick up the pace. His Hong Kong-listed telecoms-to-ports empire trades at a more than 70% discount to its book value, compared to par in 2016, LSEG data show. A smart deal in Italy could help. (By Robyn Mak)