Lyft’s IPO filing: 4 things you probably missed

Ridehailing giant Lyft filed an updated S-1 in which the company said it would sell 30.7 million common shares at a range of $62 to $68 per share.

But the company’s prospectus also contained some interesting information beyond just pricing data and financial performance.

Board diversity, Part I — Corporate boards remain overwhelmingly white and male. The situation is particularly acute among unicorn boards.

Of the more than 100 private growth firms in the United States worth at least $1 billion, women held only 8.5 percent of board seats, according to a SharesPost analysis of data from Pitchbook. Even more distressing: nearly two-thirds of the unicorns do not have any female board members.

Lyft, however, has been ahead of the curve: 3 of its 8 directors are women: Valerie Jarrett, Ann Miura-Ko, and Maggie Wilderotter. (Uber also has three female directors but more board seats.)

Lyft’s support of board diversity apparently will remain once it becomes a public company.

From its S-1:

“Although our board of directors does not have a formal written diversity policy with respect to the evaluation of director candidates, in its evaluation of director candidates, our nominating and corporate governance committee will consider factors including … gender, race, ethnicity and experience, area of expertise, as well as other individual qualities and attributes that contribute to the total diversity of viewpoints and experience represented on the board of directors.”

I’ve read plenty of regulatory filings to know that companies rarely mention race, gender, and ethnicity of their boards, never mind connect those factors with board performance.

Perhaps Lyft is responding to a changing political and legal landscape. Last year, California passed a law that requires all companies headquartered in the state to appoint a certain number of women to their boards based on the total number of board seats.

Johanne Bouchard, a board consultant, said she does not think quotas are effective. However, the law will at least push companies to think more carefully and more frequently about how they recruit and construct their boards, she said.

“Companies can assess their corporate governance effectiveness by performing an annual review on board composition and constantly refreshing it,” Bouchard said.

Board diversity, Part II— Though Lyft is ahead of the curve, it’s still worth noting that the company only added two of the three women directors — Jarrett and Wilderotter — after 2017 when rival Uber was struggling to fix a culture riven with allegations of sexual misconduct.

The two female directors also received much smaller allotments of stock compared to their male peers, perhaps because they are relatively new board members. According to the S-1, Jarrett, a former senior advisor to President Obama, holds 6,645 shares of Class A common stock, worth $451,860 at the high end of Lyft’s valuation range; Wilderotter, a former chairwoman and CEO of Frontier Communications, owns 2,006, worth $136,408.

In the future, emerging growth firms will perhaps recruit more women to the board at their earlier stages of development.

Clawback — Lyft’s board this month adopted something relatively rare for publicly traded companies: a clawback provision.

Under the new policy, the company has the right to force executives to pay back any bonuses or stock awards if they engaged in bad behavior that ultimately resulted in inaccurate financial statements.

From the S-1:

“In the event that our financial statements filed with the SEC are subject to a material negative restatement as the result of fraud, gross negligence or intentional misconduct by an executive officer… then we have the right to recover from such executive officer… an amount corresponding to any performance-based compensation.”

Clawback provisions recently came to public attention after Wells Fargo’s board in 2017 forced then CEO John Stumpf to return nearly $70 million in compensation. The board said Stumpf failed to prevent fraud at the bank, in which employees boosted sales figures by opening fake accounts in the names of real customers.

The clawback was among some of the highest in corporate history. Both Lyft and Wells Fargo are based in San Francisco.

Fidelity wins big— When Fidelity Investments first invested in Uber in 2014, Wall Street took notice.

At the time, many people were highly skeptical of unicorn valuations. Mutual funds are usually more conservative investors that mainly focus on stocks and bonds. That Fidelity, one of the largest mutual funds in the world, invested in such a high-risk asset turned heads.

The flow of institutional money into unicorns ultimately helped establish unicorns and other private growth firms as a legitimate asset class.

Valuation data shows that Fidelity funds invested in Lyft in Series H and Series I (the last funding round) in November 2017 and June 2018 respectively.

According to Lyft’s S-1, Fidelity currently owns 18.4 million shares, or 7.1 percent of the company’s Class A common stock. At the high end of Lyft’s price range, Fidelity’s stake could be worth $1.25 billion.


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