Lyft decided to suspend its rideshare service in California after being ordered to account for drivers as employees. Uber may be next. It is unlikely that Uber or Lyft could ever operate profitably were they both forced to account for all drivers as employees.
In equity and fixed income analysis we have the “consolidation” principle where if Company A controls Company B through equity, management or some other means, it is correct to consolidate Company B’s financials into Company A’s. It seems straight forward to apply that same principle to Uber and Lyft drivers who perform a service on behalf of UBER and LYFT. Which other states may follow California’s lead? New York? Massachusetts? Maryland? This could be a game of rideshare dominoes.