
[Federal Register Volume 84, Number 53 (Tuesday, March 19, 2019)]
[Notices]
[Pages 10156-10157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05168]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33399; File No. 812-15009]


Lyft, Inc.

March 14, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under Section 3(b)(2) of the 
Investment Company Act of 1940 (``Act'').

Applicant: Lyft, Inc. (``Lyft'').

Summary of Application: Applicant seeks an order under Section 3(b)(2) 
of the Act declaring it to be primarily engaged in a business other 
than that of investing, reinvesting, owning, holding or trading in 
securities. Applicant states that it is primarily engaged in the 
business of operating a multimodal transportation network that offers 
access to a variety of transportation options.

Filing Dates: The application was filed on March 13, 2019.

Hearing or Notification of Hearing: An order granting the requested 
declaration will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on April 5, 2019 and should be accompanied by proof of 
service on Applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549-1090. Applicant, 185 Berry Street, Suite 5000, 
San Francisco, California 94107.

FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior 
Counsel, or David J. Marcinkus, Branch Chief, at (202) 551-6825, 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicant's Representations

    1. Applicant is a Delaware corporation that, directly and through 
its wholly-owned subsidiaries, is in the business of operating a 
multimodal transportation network that offers access to a variety of 
transportation options. Applicant states that its primary business is 
facilitating peer-to-peer ridesharing by connecting drivers who have a 
car with passengers who need a ride as a transportation network company 
(``TNC'').\1\ Applicant states that its operations also include 
providing a network of shared bikes and scooters, offering integrated 
third-party public transit data that provides a robust view of 
transportation options, and providing access to autonomous vehicles.
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    \1\ Applicant states that its wholly-owned subsidiary, a captive 
insurance company that is registered in Hawaii, reinsures auto-
related risk from third-party insurance providers.
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    2. Applicant states that its business operations necessitate the 
Applicant to maintain a substantial cash position. Applicant states 
that the TNC industry is a cash intensive industry that requires it to 
have readily available capital for ongoing operations and expenditures. 
Applicant also states that it needs to maintain substantial liquid 
capital to fund research and development activities; pursue potential 
strategic acquisitions, including acquisition of businesses, new 
technologies, services and other assets and strategic investments that 
complement its business; and to retain sufficient insurance reserves.
    3. Applicant states that it seeks to preserve its capital and 
maintain liquidity, pending the use of such capital to support its 
business operations, by investing in short-term investment grade and 
liquid fixed income and money market instruments that earn competitive 
market returns and provide a low level of credit risk (``Capital 
Preservation Investments''). Applicant states that it does not invest 
in securities for short-term speculative purposes.

Applicant's Legal Analysis

    1. Applicant seeks an order under Section 3(b)(2) of the Act 
declaring that it is primarily engaged in a business other than that of 
investing, reinvesting, owning, holding, or trading in securities and 
therefore is not an investment company as defined in the Act.
    2. Section 3(a)(l)(A) of the Act defines the term ``investment 
company'' to include an issuer that is or holds itself out as being 
engaged primarily, or proposes to engage primarily, in the business of 
investing, reinvesting or trading in securities. Section 3(a)(l)(C) of 
the Act further defines an investment company as an issuer that is 
engaged or proposes to engage in the business of investing, 
reinvesting, owning, holding or trading in securities, and owns or 
proposes to acquire investment securities having a value in excess of 
40% of the value of the issuer's total assets (exclusive of Government 
securities and cash items) on an unconsolidated basis. Section 3(a)(2) 
of the Act defines ``investment securities'' to include all securities 
except Government securities, securities issued by employees' 
securities companies, and securities issued by majority-owned 
subsidiaries of the owner which (a) are not investment companies and 
(b) are not relying on the exclusions from the definition of investment 
company in Section 3(c)(1) or Section 3(c)(7) of the Act.
    3. Applicant states that it does not hold itself out as being 
engaged primarily in the business of investing, reinvesting or trading 
in securities. Applicant states, however, that it maintains a 
significant amount of intangible assets, such as internally-generated 
intellectual property and its established user base that may not appear 
on its balance sheet. In addition, Applicant states that it is likely 
to invest

[[Page 10157]]

a significant portion of the cash proceeds from its initial public 
offering in Capital Preservation Investments, which may be deemed 
investment securities for purposes of Section 3(a)(1)(C). Accordingly, 
Applicant states that its ability to avoid meeting the definition of 
investment company in Section 3(a)(1)(C) is uncertain.
    4. Section 3(b)(2) of the Act provides that, notwithstanding 
Section 3(a)(l)(C) of the Act, the Commission may issue an order 
declaring an issuer to be primarily engaged in a business other than 
that of investing, reinvesting, owning, holding, or trading in 
securities directly, through majority-owned subsidiaries, or controlled 
companies conducting similar types of businesses. Applicant requests an 
order under Section 3(b)(2) of the Act declaring that it is primarily 
engaged in a business other than that of investing, reinvesting, 
owning, holding, or trading in securities, and therefore is not an 
investment company as defined in the Act.
    5. In determining whether an issuer is ``primarily engaged'' in a 
non-investment company business under Section 3(b)(2) of the Act, the 
Commission considers the following factors: (a) The company's 
historical development, (b) its public representations of policy, (c) 
the activities of its officers and directors, (d) the nature of its 
present assets, and (e) the sources of its present income.\2\
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    \2\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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    6. Applicant submits that it satisfies the criteria for issuance of 
an order under Section 3(b)(2) of the Act because Applicant is 
primarily engaged in the business of operating a multimodal 
transportation network that offers access to a variety of 
transportation options and is not in the business of investing, 
reinvesting, owning, holding, or trading in securities
    a. Historical Development. Applicant states that beginning in 2007, 
when it was first incorporated, and continuing through the present, 
Applicant has developed and operated transportation solutions. 
Applicant states that since 2012 it has developed and operated a 
multimodal transportation network. Applicant states that it is one of 
the largest multimodal transportation networks in the United States and 
in Canada, with 18.6 million active riders and over 1.1 million drivers 
who provided rides in the quarter ending December 31, 2018.
    b. Public Representations of Policy. Applicant states that it has 
consistently represented publicly that it is engaged in the business of 
operating a multimodal transportation network. Applicant represents 
that it has never held and does not now hold itself out as an 
investment company within the meaning of the Act or as engaging in the 
business of investing, reinvesting, owning, holding, or trading in 
securities. Applicant's offering documents emphasize its operating 
results and do not emphasize either its investment income or the 
possibility of significant appreciation from its cash management 
investment strategies as a material factor in its business or future 
growth.
    c. Activities of Officers and Directors. Applicant represents that 
its board of directors and officers devote substantially all of their 
time to managing Applicant's multimodal transportation networks. 
Applicant's cash management activities are managed by its Chief 
Financial Officer and one external investment manager, whose activities 
are supervised by the Chief Financial Officer. Applicant states that 
its Chief Financial Officer spends less than 2% of his time monitoring 
Applicant's cash balances and managing short-term investment securities 
in accordance with Applicant's investment policies. Further, Applicant 
states that no executive officer, other than the Chief Financial 
Officer, spends time monitoring the cash balances and managing short-
term investment securities.
    Applicant states that as of December 31, 2018, it had approximately 
4,791 employees. No employee spends time on matters relating to the 
management of Applicant's investment securities.
    d. Nature of Assets. Applicant states that as of December 31, 2018, 
Applicant's investment securities constituted approximately 68.8% of 
its total assets (excluding Government securities and cash items) on an 
unconsolidated basis. Furthermore, 100% of its investment securities 
consisted of Capital Preservation Investments.\3\ Applicant anticipates 
that its investment securities other than Capital Preservation 
Investments will not exceed 10% of its total unconsolidated assets 
(excluding Government securities and cash items) in the future. 
Applicant states that it expects to continue investing in Capital 
Preservation Investments, as well as Government securities and cash 
items, to fund its current and future operations.
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    \3\ Applicant states that, with the exception of its captive 
insurance company, none of its wholly-owned subsidiaries hold 
investment securities. Applicant further states that while its 
captive insurance company holds a substantial amount of investment 
securities, the insurance company is not an investment company in 
reliance on Section 3(c)(3) of the Act.
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    e. Sources of Income and Revenue. Applicant represents that since 
its inception it has had net operating losses. It does, however, derive 
income from its investment securities. Applicant states that a review 
of its current sources of revenues provides a more accurate picture of 
its operating company status, particularly given the substantially 
increased revenues from its operating activities. Applicant states 
that, for the year ended December 31, 2018, Applicant earned from its 
operating activities approximately $2.16 billion of revenues, compared 
to $1.05 billion of revenues in 2017 and $343 million of revenues in 
2016. In contrast, Applicant earned $66 million in net investment 
income in 2018, $20 million in net interest income in 2017, and $7 
million in net investment income in 2016, all derived from the Capital 
Preservation Investments. Applicant states that if net investment 
income were compared to its total revenues it would account for 
approximately 3% of total revenues in 2018 and approximately 2% of 
total revenues in 2017 and 2016.
    7. Applicant asserts that its historical development, its public 
representations of policy, the activities of its officers and 
directors, the nature of its assets and its sources of revenue, as 
discussed in the application, demonstrate that it is engaged primarily 
in a business other than that of investing, reinvesting, owning, 
holding, or trading securities. Applicant thus asserts that it 
satisfies the criteria for issuing an order under Section 3(b)(2) of 
the Act.

Applicant's Conditions

    Applicant agrees that any order granted pursuant to the application 
will be subject to the following conditions:
    1. Applicant will continue to allocate and use its accumulated cash 
and investment securities for bona fide business purposes; and
    2. Applicant will refrain from investing or trading in securities 
for short-term speculative purposes.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05168 Filed 3-18-19; 8:45 am]
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