Lyft's Ride Begins on the NASDAQ

Dwayne Harmon
March 31, 2019

Ride-hailing company Lyft has priced its shares at $72 a piece and raised $2 billion prior to debuting on the New York Stock Exchange this morning.

The real test will come when the stock hits the public market for its first day of trading -- and beyond. Snap now trades at less than two-thirds of its listing price while Alibaba has nearly tripled its market value.

Lyft is a startup "unicorn" that has Wall Street gushing with excitement, but don't jump on the Lyft IPO bandwagon just yet. If Lyft was sold at $21 billion - sure, not the whole company but - and a day later is worth $30 billion then that's a failure.

Despite the steep losses, D.A. Davidson analyst Tom White expressed optimism about the company in an investor note this month, citing "continued growth" of the broader ride-hailing market and "Lyft's impressive US market share gains and momentum". Uber has been told by its investment bankers that it could be valued at as much as $120 billion. That value rises to about $25 billion, including restricted stock and greenshoe shares that could be issued by underwriters.

The first project will be in Los Angeles, where it will offer rides to individuals who provide services to the homeless. Besides Uber, others expected to go public in 2019 include Pinterest, Slack and Zoom.

Lyft's IPO sets the stage for the stock market debut of larger rival Uber Technologies Inc, which Reuters has reported will kick off in April.

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In a promotional video released this month for the company's investor roadshow ahead of the IPO, Lyft COO John McNeill said: "Now that ride sharing has become more mainstream, we believe that users are increasingly choosing a platform based on brand affinity and value alignment". "We really think this is going to be the best year we've seen for IPOs in ages", Jackie Kelley, Americas IPO leader at Ernst & Young, said in an interview.

Once companies go public, investors can be unforgiving if those market debutantes don't meet high expectations.

But Lyft lost $911 million (roughly Rs. 6,325 crores) on $2.2 billion (roughly Rs. 15,276 crores) in 2018 revenues.

Lyft's co-founders Logan Green and John Zimmer have structured the shares so that together they will hold 49 percent of the voting power, enough to substantially influence major decisions.

JPMorgan Chase & Co. led the offering with Credit Suisse Group AG and Jefferies Financial Group Inc. It closed at $78.29, up 8.7 per cent, giving the company a $27 billion valuation. However, that could change in the future as the news spreads - the last thing Lyft wants right now is bad publicity. Lyft's successful venture has happened amidst the firm's steep losses, criticism about its dual share structure as well as concerns over its plan for autonomous driving for fear of missing out on their strong revenue growth. "This IPO is clearly a giant success", said Barrett Daniels, a Deloitte partner who specializes in IPOs.

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