Lyft's Typographical Error Sends Trader on a Financial Rollercoaster
For Sinisa Sorgic, a trading veteran with two decades of experience, the 45 minutes it took Lyft Inc. to correct a typographical error in its earnings release transformed an ordinary trading day into an unforgettable adventure. Working from his home in Indiana, Sorgic was caught off guard when he saw Lyft's stock price soar by 50% in after-hours trading, driven by the company's earnings announcement which inaccurately predicted a 500 basis point increase in its operating margin for the year. This dramatic surge was particularly shocking given that Lyft's stock had closed just over $12 and hadn't surpassed the $16 mark in more than a year.
Sensing that the market's reaction might be an overreach, Sorgic made the decisive move to short the stock at $16. However, the shares' continued ascent to above $20—a more than 60% jump from the day's close—left him staring down the barrel of a potential $2,000 loss. Despite feeling a mix of anger and embarrassment over the position he found himself in, Sorgic chose to stay the course, a decision that soon proved fortuitous.
The critical moment came during Lyft's conference call with analysts when CFO Erin Brewer discussed the company's operating margins. Contrary to the earnings release, Brewer stated that the margins were expected to grow by only 50 basis points, not the 500 basis points that had been initially reported. It was Bernstein analyst Nikhil Devnani's question during the call that prompted the clarification, revealing the error in the release.
Following this revelation, Lyft's stock price quickly retreated to $14, providing Sorgic with an unexpected opportunity to exit his position at a slight profit, netting him nearly $1,000. Reflecting on the whirlwind experience, Sorgic expressed a mix of initial frustration and subsequent relief, acknowledging the rollercoaster nature of stock trading where fortunes can be dramatically influenced by unforeseen events such as a simple typo.
Sorgic's tale serves as a cautionary reminder of the volatile and unpredictable nature of the stock market, where information is king and even seemingly minor errors can lead to significant financial repercussions. His experience underscores the importance of agility and resilience in trading, qualities that allowed him to navigate through a potentially disastrous situation to a favorable outcome. Despite the stress of the moment, Sorgic can now look back on the incident with a sense of humor, recognizing it as just another chapter in his long trading career, filled with its fair share of ups and downs.
