Transportation network company Lyft has very recently joined Nasdaq, but after just a few days following its debut on Friday, it has shown its effective investor demand.
The San Francisco ride-hailing service shares rose as high as 23%. This predicts well, especially for its nearest contender, Uber.
Lyft’s impressive performance is 2019’s most significant and has set the pace for other companies located at Silicon Valley. These companies are looking forward to their chance to join Nasdaq this year.
Other so-called “unicorns” will soon join the stock market this year including Postmates Inc., Pinterest Inc., and Slack Technologies Inc.
Lyft’s success was entirely unexpected after it was subject of much criticism because of its structure. Steep losses as well as worries regarding its program for autonomous driving and new rules that aim to improve driver earnings.
Investors that are closely monitoring Lyft’s financial growth after suffering an extended stretch with other IPOs from top tech companies are taking part in the offering.
Allianz analyst Catherine McCarthy mentioned in an interview that everyone wants to invest in tech because there’s money in this industry. She called this a new era, and since this is new, people are very interested in it.
On Thursday, the transportation company priced 32.5 million shares, a value more than it was presented at $72 which was the top of its elevated $70 to $72 for every share target range. This has increased $2.34 billion from its initial value.
Lyft’s stock opened a healthy $87.24; however, this led to gains at 8.7% at $78.29. The ride-sharing company has earned market funding close to $22.2 billion.
The company’s offering concluded at 20 times overenrolled compared to other top IPOs. Lyft has more than 500 requests from investors including mutual funds. But despite this positive outcome, there are also some concerns that tech companies might come back and rise once more.
In 2018, Lyft’s loss increased from $688 million to $911 million in just a year. Its revenue doubled in 2018 to $2.16 billion, and aside from this, it has not announced a timeline when it will generate a profit.
Because of this, Lyft’s IPOs and other loss-making companies offered a problem for investors waiting for growth. These investors don’t want to overlook businesses with impressive growth and weigh the risk of partnering with companies with unverified financial systems.
JMP Securities President Mark Lehmann mentioned that investment managers would probably make a decision in the coming 12 to 18 months about these upcoming IPOs considering that these are an increasing part of the industry.
Uber is set to launch its IPO this April. The transportation/ride-sharing company would be assessed at around $128 billion if it would be awarded similar multiples. It was reported that some of its losses are from its ride-sponsoring promos which is a special offer to attract more customers.
Meanwhile, Glade Brook Capital Partner’s founding partner Paul Hudson said that customers should expect rationalized prices on fares toward tolerable rates when Uber and Lyft become public companies.
Lyft has experienced an increase in market shares from 35% to 39% in the United States as of December. In fact, its own supporters were surprised that Lyft was able to succeed against its well-funded counterpart, Uber.
Lyft has left its detractors in the dust. Everyone presumed that the company wouldn’t reach this level. Mayfield’s venture capitalist Navin Chaddha revealed that he was one of the people who invested early in Lyft in 2011. He’s now surprised that it was able to catch up and take the lead.
Lyft vs. Uber
From way back, Uber has outraised the new Nasdaq player by billions. The company used striking techniques such as preventing possible investors that checked Uber’s financial data with the smaller, company’s.
Sean Aggarwal, chairman of Lyft, said in an interview that the company would remain in support of their North American expansion over their international development. Remember that Uber’s service is accessible in 70+ countries despite consolidating certain markets overseas. On the other hand, Lyft will continue to only serve Canada and the United States.
Aggarwal further said that owning and expanding their North American market is their priority. This was their formula for being able to commit to their public shareholders. The chairman mentioned this as Lyft celebrated their success last week.
On a side note, Lyft celebrated this milestone in a vacant auto dealership in Los Angeles. The staff and their family and friends together with guest Los Angeles Mayor Eric Garcetti came for the kickoff.
This downtown location will be Lyft’s driver services headquarters, the very first of several services center to start across the country this year. Drivers can come to these locations to get help from settling taxes to the maintenance of their electric vehicles.
It won’t be long when Lyft is also accessible to countries like Australia and Mexico. Aggarwal also mentioned that the co-founders of the company are doing their best to make their co-founders more comfortable especially with their controversial dual-class share system. This structure has faced so much criticism especially from corporate governance supporters as well as a few investors.
This unique structure is quite common in top tech companies, but still, investors remain skeptical. The arrangement provides founders with more votes for every share and higher control of the business even after its startup. The company’s dual-class share structure will provide founders and some shareholders 20 votes for every share.