Uber Technologies (UBER) - Get Report shares surged higher Wednesday, as did its ride-sharing rival Lyft Inc. (LYFT) - Get Report, as early indications from a ballot initiative in California suggest the two companies can continue to treat their drivers as independent contractors.
California voters look to have passed Proposition 22, the most expensive ballot initiative in the state's history, by a 58% to 42% margin Wednesday, enabling Uber, Lyft and other so-called 'gig economy' companies to allow drivers and delivery workers to set their own hours. Passing Proposition 22 will override a 2019 law that classified the drivers as employees of the San Francisco companies.
The win also relieves the burden of offering healthcare, unemployment insurance and minimum wage salaries from gig economy companies, who had argued such cost would lead to job cuts and price increases.
Uber shares were marked 12.2% higher in early trading Wednesday to change hands at $40.10 each, extending their six-month gain to around 47.3%. Lyft shares, meanwhile, surged 15% to $30.15 each.
Uber earns around 10% of its annual booking revenues from the California market, while MKM Partners analyst Rohit Kulkarni said around 15% of Lyft's pre-COVID bookings came from the state.
Uber won a key legal victory in its biggest European market in late September when Deputy chief magistrate Tan Ikram, who presided over the lengthy appeal made by Uber to a Transport For London decision to remove the group's operating license in 2017, and then again in 2019, said he was convinced that the ride-hailing group "no longer poses a risk to public safety" and granted it a license for the next 18 months.
Transport for London, which is headed by Mayor Sadiq Khan, had argued that thousands of Uber journeys in the capital were made in cars driven by non-licensed drivers using fraudulent IDs to log onto the group's platform.