Lyft sinks on California ridership suspension announcement

Lyft announced it would be suspending its California ride-sharing service Thursday afternoon, after being ordered to classify its drivers as employees. Yahoo Finance's Sibile Marcellus joins Akiko Fujita to discuss the details.

Video Transcript

AKIKO FUJITA: But let's start with that story that broke out of California just a few hours ago, Lyft announcing it will be suspending its operations after a court ruling that required not just Lyft, but Uber, to classify its employees as full time employees. The stock was down as much as 8%. It has come back off of its lows, but still off about 1.5%.

Sibile Marcellus is tracking that story for us. And Sibile, we know Lyft and Uber both made the threats, in fact, that they would shut down. And it looks like Lyft is moving forward, and Uber could potentially follow.

SIBILE MARCELLUS: That's right, Akiko, Lyft is taking a stand. This comes after a judge ruled that Lyft and Uber would have to reclassify drivers as employees to abide by California's law. Well, Lyft has no intention of doing that.

Here is what the company put in a statement, quote, "As a result of a court order, we'll be suspending ride share throughout California at 11:59 PM on Thursday, August 20. We did everything we could to prevent this from happening and keep Lyft available for you. But it wasn't possible to overhaul our business model and operations in 10 days."

So what Lyft is doing here is instead of abiding by what the judge ruled in California law, according to that judge, what they're preferring to do is just suspend ride sharing service entirely in the state of California. Now, it's important to note that if Lyft and Uber were to abide by that judge's ruling, that could upend their entire business model, especially if other states follow in the footsteps of California and enact their own laws.

AKIKO FUJITA: OK, Sibile. And we should point out, Lyft did highlight that you can still use the app for bike, scooter, and car rentals as well. This is specifically for drivers. But with that proposition in November, that ballot measure about classification of these drivers, voters voting on that come November, this issue is certainly going to be in the headlines for another several months. Thanks so much for that, Sibile.