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Lyft's Earnings Typo Sends Trader on Turbulent Short-Selling Journey
Ticker Tea
February 15, 2024
📝 SUMMARY: The trading world is full of surprises, but few could rival the wild ride experienced by Sinisa Sorgic, a trader at Bright Trading, due to a simple typo in Lyft Inc.'s ($LYFT) earnings release. The mishap unfolded on a seemingly ordinary Tuesday afternoon, when Lyft's stock unexpectedly spiked 50% post-earnings announcement, driven by an unbelievable prediction of a 500 basis point increase in operating margin for the year. This dramatic surge was a result of a typo, a detail initially missed by many, including Sorgic.
Operating from his home in Indiana, Sorgic, a seasoned trader of 20 years, was quick to recognize the irrational exuberance propelling Lyft's stock from just over $12 to beyond $16. Deciding to short the stock at this inflated price, he soon found himself in a precarious situation as the stock continued to climb, reaching above $20 and marking a more than 60% increase from its closing price the previous day. This surge put Sorgic on the brink of a significant loss, testing his resolve.
The situation began to unravel during Lyft's earnings call, as CFO Erin Brewer clarified that the company's operating margins were expected to grow by only 50 basis points, not the 500 reported due to the typo. This correction sent Lyft's stock tumbling back down, allowing Sorgic a narrow escape from his risky position, ultimately pocketing a small profit of under $1,000.
Sorgic's experience underscores the volatile nature of stock trading, where fortunes can swing wildly on the smallest of errors. It's a cautionary tale of the risks inherent in short selling, particularly in a market that can be as unpredictable as it is unforgiving. Despite the initial embarrassment and frustration, Sorgic's story ended with relief and a valuable lesson in the importance of patience and precision in the trading world.
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