Lyft’s IPO price is rising, but could it do a U-turn when trading begins on Friday?
The online taxi app now sees a range between $70 and $72 per share. That’s up from $62-$68. It shows that despite red flags like growing losses and a dominant rival, Uber, FOMO around 2019’s biggest IPO so far could create the type of ‘pop’ investors typically want. But with 2018 revenue doubled at $2.16bn and cash burn up a third to $911m, sentiment could yet make a sharp U-turn. Here are six things traders need to know before the launch.
- Lyft's IPO is now heavily oversubscribed, attesting to strong demand. Share supply fell short of demand just two days into its investor roadshow, last week
- The mid-point of its new price range, $71/share would rake in $2.1bn in new equity capital
- The upper end of Lyft’s new range gives a market capitalisation of $20.25bn, slightly topping Snap’s IPO value. Lyft's final round of private fund raising in 2018 valued it at $15bn
- Apart from lack of profitability, challenges to a stable Lyft valuation include costs related to processing transactions and investments in its scooter business
- It is also lagging Uber in rebalancing the share of revenue it shares with drivers, having begun to reduce driver benefits three years ago. Doing so now is even trickier, with average Uber driver pay rising again. Regulatory pressures, like a likely move to a minimum wage for New York City drivers, could also disrupt cost plans
- On the plus side, there is plenty of evidence that Lyft growth rates remain healthy. It recently announced that it has passed the 1 billion ride mark, around a year after reporting 500 million riders from inception in 2012. Dividing that by 12 months (ignoring seasonal differences) equates to just under 50 million riders a month, more than double the volume reported by the Wall Street Journal in December 2017
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