Shares of Lyft (LYFT) dropped on Monday after the company announced that it would remove 3,000 of its electric bikes from service in three cities due to a braking problem.
LYFT REMOVES THOUSANDS OF CITI BIKES FROM SERVICE: Lyft said on Sunday that it is removing several thousand electric bikes from service in its bike-share program in New York, Washington and San Francisco because of a braking problem. "We recently received a small number of reports from riders who experienced stronger than expected braking force on the front wheel," the company said in a blog post.
"Out of an abundance of caution," Lyft said it is "proactively removing the pedal-assist bikes from service for the time being. We know this is disappointing to the many people who love the current experience -- but reliability and safety come first." According to The New York Times' Tyler Pager, "dozens" of riders have reported injuries while riding electric Citi Bikes, including several people have flipped over the front after hitting the brakes. In the meantime, standard bikes will be installed to replace the pedal-assist bikes, the company said, noting it does not expect a service interruption.
Lyft also commented that "We have been hard at work on a new pedal-assist bike, and are excited to bring that to you soon. The new bike model will be accessible just by scanning a QR code and overall will be more fun to ride. In the meantime, we will quickly replace the pedal-assist bikes with classic pedal bikes."
WHAT'S NOTABLE: Lyft, which went public in March at an overall valuation of more than $24B, bought Citi Bike operator Motivate last year in a move to fend off competition from rival Uber (UBER), which previously acquired electric bicycle-sharing startup JUMP Bikes.
Uber recently filed for an IPO, not long after Lyft's own listing. Since going public on March 29, Lyft has been in focus for a multitude of developments, including a Wall Street Journal report that said billionaire investor Carl Icahn had sold his roughly 2.7% stake in Lyft ahead of its IPO. Meanwhile, Lyft shares saw a bump late last week after Andrew Left's Citron Research advised against shorting the stock, saying the same short thesis that is being passed around on Lyft by the "amateur shorts" would have seen investors short Amazon (AMZN), Netflix (NFLX), Square (SQ) and others. Additionally, CNBC previously reported that Lyft is threatening to sue Morgan Stanley (MS), accusing the firm of supporting short-selling for investors subject to lock-up agreements.A spokesperson for the New York City Department of Transportation said in a statement on Monday that "We expect Lyft to maintain a safe and fully operational fleet providing sufficient service and we will monitor as they investigate the cause of this brake issue."
PRICE ACTION: In early afternoon trading, shares of Lyft are down nearly 7% to $55.84. Lyft opened for trade at $87.24 on the morning of March 29, after having priced its 32.5M share IPO at $72.00 per share.
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