Here’s what Lyft talks about as risk factors that other companies don’t

The bumpy road to going public.
The bumpy road to going public.
Image: AP Photo/Richard Vogel
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Most companies have bugbears that keep their investors up at night—financial question marks, hefty insurance bills, rogue management; the list goes on. Ride-hail company Lyft, which on Friday (March 1) filed paperwork to go public, has its own list of fears, many of them unique to the wide new world of transportation as a service (TaaS). 

A machine-learning algorithm trained by Quartz looked at what Lyft says are its risk factors to assess which are the most distinctive. In practice, we wanted to know what Lyft worries about that most other large public companies do not. Some of these risks, such as PR crises, may be far from the minds of Lyft’s customers. Others, such as vehicle defects (#20) or autonomous vehicles and rental scooters causing injuries (#24), directly affect riders.

To evaluate how distinctive these risks are, the algorithm examined all the words used in the “Risk Factors” section of Lyft’s IPO filing and compared them to the words in the “Risk Factors” sections of annual financial filings from the companies in the S&P 500. It uses a kind of (rudimentary) artificial intelligence called TF-IDF that identifies which words and phrases are most “distinctive” in the document compared to a corpus of related documents.

While many companies, including Lyft, identify risks about “liquidity” and “debt,” we’re principally interested in the risks for Lyft that don’t exist for S&P 500 companies involved in more traditional industries.

Here are a few unusual risks from our algorithm-powered top 25.

  • AWS (#6): Lyft’s platform is hosted and supported by Amazon Web Services’ third-party cloud. Because Lyft doesn’t control it, it is vulnerable to outages, delays or other interruptions, as well as greater damage from “natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct.”
  • Public perception (#22): Lyft worries that its three focus areas—ride-sharing, autonomous vehicles, and bike and scooter rentals—could develop a bad reputation. Even incidents involving Lyft’s competitors stand to hurt Lyft.
  • Independent contractors (#17): For now, Lyft drivers are independent contractors, not employees. But that could change: “Our arguments may ultimately be unsuccessful” in fighting off lawsuits trying to improve Lyft drivers’ wages, benefits, and rights, the filing documents note.
  • Arbitration (#23): Lyft bans both drivers and riders from taking it to court, requiring them to go to arbitration instead. Lyft acknowledges “these provisions have been the subject of increasing public scrutiny”—and that it recently made an exception, allowing sexual misconduct claims to be taken to court.
  • Autonomous vehicles (#4): Lyft is developing its own autonomous vehicles, but says it allows other autonomous-vehicle companies to offer rides through the Lyft app. Rather than worrying about whether there’s a future for autonomous vehicles, Lyft instead fears being “unable to efficiently develop our own autonomous vehicle technologies … in a timely manner.”
  • NOLs (#11): Lyft is still a long way from being profitable, with $1.7 billion of federal, $1.5 billion of state, and $10.9 million of foreign net operating loss carry-forwards, or NOLs, at the end of last year. It can use these losses to offset tax, but only if its ownership remains the same.
  • Open source software (#9): Lyft uses open source software as part of its platform. While this may save the company money, it exposes it to the possibility of legal risks if licenses are interpreted by the courts in unexpected ways, or supposedly “open source” software turns out to be owned by someone else.
  • HIPAA (Bonus! #33): What does the health care data privacy law have to do with an app-based taxi company? Lyft says it is sometimes subject to HIPAA when medical providers use Lyft’s Concierge product, which lets businesses set up rides for their customers.

This story was reported as part of Quartz’s AI Studio.