Jim Cramer Asks: Where Are Uber and Lyft's Driverless Cars?
Uber and Lyft might be shutting down in California as soon as this week.
Both rideshare firms said that they'll pull out of the state in response to a recent court ruling that ordered them to reclassify their drivers as employees within 10 days. That ruling was issued on August 10, which means the order takes effect on Friday unless the companies are granted an extended stay.
The companies have threatened to leave the state until November, when California voters will decide on Prop 22, which is backed by a number of gig platforms including Uber, Lyft and DoorDash, that would overturn key provisions of AB5, a law enacted this year that reclassified swaths of independent contractors as employees.
Both companies could lose out on roughly ten weeks' worth of rides revenue in the most populous U.S. state, spanning the end of Q3 and the beginning of Q4.
Both companies are based in California, and it's an important consumer market for both.
TheStreet's Annie Gaus wrote, "On a recent earnings call, Lyft president John Zimmer told investors that California makes up 16% of Lyft's overall rides, though management added that the state has been recovering more slowly than most markets. Lyft, which operates only in the U.S. and Canada, saw revenue drop 61% last quarter, though it reported improvements in July."
On Thursday, Lyft posted, "At 11:59PM PT today our rideshare operations in California will be suspended. This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips. We’re personally reaching out to riders and drivers to share more about why this is happening."
So, what does Lyft pausing rides mean for Uber and Lyft? Watch to hear Jim Cramer's thoughts.
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