Harvard Researchers say Lyft Investors will Face Regrets

New research published by Harvard researchers paints a dire picture for early Lyft investors.

Business Insider reports that Lyft investors allowed founders Logan Green and John Zimmer to retain to much control over the company. The investors chose to allow Lyft’s founders to retain near-complete control over the company, despite their lack of significant shares. The dual-class structure allows Green and Zimmer to retain almost complete control over Lyft, while the two own less than 5% of the company together. A concentration of voting power can reasonably be expected to harm the company’s share values going forward. Furthermore, the current managerial situation can be expected to harm shareholders going further, especially if Green and Zimmer don’t see eye-to-eye on all the issues.

The power structures of emerging companies are critical once a company decides to go public. The public needs to feel reassured that the company they are investing in will be able to share power responsibly and make important decisions gracefully. In the case of Lyft, the Harvard Law study found that Green and Zimmer could maintain a significant level of control with as little as 2.65% of company equity.

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5 years ago
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