UPDATE: LYFT PRICED AT $72.
The IPO of ride-sharing unicorn Lyft is likely (this afternoon) to price at the top end of the upwardly revised US$70-$72 range or better after drawing huge demand from investors during the two-week roadshow.
Though there’s plenty of angst about Lyft’s cash burn and the fact it lost US$911.3m last year, at this point it simply doesn’t matter.
Reservations about the ride-sharing business model – in short, give it away if you have to, but get to scale as quickly as possible – and various regulatory issues are well-founded. But in Lyft’s case, these are questions for another day.
IPO investors want to invest in growth and companies that are doubling their top-line at scale don’t come along often.
Even if the overall market takes a breather here, companies that are growing at rates well in excess of the broader market and carving out new industries should fare relatively well.
This is probably why – somewhat counterintuitively – high-growth (tech) and defensive stocks outperformed in Q1, a quarter that saw the Federal Reserve become much more dovish and recession fears ease even with trade concerns top of mind.
Though Lyft’s financials are splotched with red ink, the growth is undeniable as is the potential size of the ride-sharing market if Lyft and Uber and others succeed in killing off household ownership of the automobile.
Anyway, that’s the potential. At this stage it is almost pointless to predict whether this happens and whether some other unicorn emerges with a even better model to deliver what Lyft calls “transportation-as-a-service”.
The IPO roadshow was standing room only and virtually everyone who got a chance put in an order.
Lyft made it clear in its filing it was not focused on short-term profits, or profitability at all, but investors won’t be too worried as long as the company is growing.
The lingering question is whether Lyft or arch-rival Uber, soon to follow with its own IPO, is the better bet.
I heard someone say yesterday that Lyft is just a smaller Uber with better PR. Of course, there are some differences between these companies in their geographical reach and the extent of their focus on other businesses, but it is true the ride-sharing experience is close to identical for customers.
Given the financial profile of the industry, that means the company with the deepest pockets is likely to have the most success.
Because of its larger size, Uber should be better placed to raise additional capital (equity, debt, convertible debt etcetera) and outlast Lyft in any extended price-based market share war in key cities.
That said, there may be room for both and investors at the moment clearly figure that Lyft is a great bet on the ride-sharing phenomenon.