Lyft Ipo - Should you buy?

Should You Buy Lyft’s Stock When They IPO?

One bullish analyst from a top Wall Street firm gave Lyft, Inc. its first buy rating last week, with shares set to start trading on March 29.

The No. 2 player in the ride-sharing market — second to Uber — “has made impressive market share gains within the U.S. as demand for ride-sharing continues to grow,” analyst Tom White of D.A. Davidson wrote in a note about Lyft’s prospects, as reported by Bloomberg News. “The continued population migration to cities and the rising costs of personal car ownership will further drive adoption of ‘Transportation as a Service’ models over the coming years.”

With a valuation of $23 billion and a reported increase in market share growth from 22 percent to 39 percent during the past two years, the San Francisco-based company has many eager investors clamoring to buy its shares when it debuts on the stock exchange March 29 (trading as NASDAQ: LYFT).

Others are more hesitant to make a move on Lyft, citing deep losses, increasing competition, and limited shareholder voting rights as three main concerns, according to The Motley Fool. The company itself has described the 30.77 million shares it will make available through its initial public offering as oversubscribed.

Given these mixed reactions and Lyft’s own assessment, should you buy Lyft stock when they IPO?

It appears that many investors are willing to turn a blind eye to uncertainty with regard to Lyft’s profitability outlook and its future strategy for self-driving cars in order to take part in the first and the biggest, most high-profile tech IPO in 2019 (rival Uber is planning to kick off its initial public offering in April). If you consider yourself this type of investor, then Lyft may bring a mighty reward — or a major loss.

For the more measured, financially-conservative types unmoved by buzz, hype, and anticipation, there are several factors to consider before investing in Lyft.


In its updated U.S. Securities and Exchange Commission filing, Lyft priced its 30.77 million shares between $62 and $68 per share, which, the company estimates, will bring in around $2 billion in cash that will be used for working capital and general corporate purposes. Based on these numbers, Lyft’s IPO would give the company a $23 billion valuation.

At an expected $65 price per share, Lyft is valued at about 5.4 times enterprise value to sales, which White considers “reasonable given Lyft’s growth profile.” Given the popularity of ride-sharing, growing market demand, and the buzz surrounding Lyft’s IPO, the analyst believes Lyft’s target share price should be $10 higher than the IPO’s midpoint average and set his buy recommendation at $75 per share — a 15 percent premium over the IPO’s pricing range. White’s share valuation is based on a 6.4 times 2019 enterprise value to sales multiple, according to Yahoo! Finance.

White’s share valuation may be on point given that many initial public offerings typically price shares at a 10 to 15 percent discount to the company’s valuation. Lyft’s share price is expected to be finalized on March 28, according to The New York Times— one day before trading begins.

A higher share price could mean higher rewards in the long run … or maybe not. According to venture capitalist Alan Patricof, an early big tech investor, the initial stock price of an IPO is usually driven by excitement and takes a while to settle.

“It’s a confusing time,” said Patricof, the co-founder and managing director of Greycroft LLC, in an interview with CNN.

Potential Risks

Lyft has admitted that it may never become a profitable company. In mandatory disclosures filed with the SEC during the IPO process, the ride-sharing company reported a net loss of $911.3 million last year on revenue totaling $2.2 billion, according to The Washington Post.

“We have a history of net losses and we may not be able to achieve or maintain profitability in the future,” Lyft disclosed in its SEC filing, also admitting that its limited operating history and evolving business “makes it difficult to evaluate our future prospects.”

Lyft’s $911.3 million loss in 2018, Yahoo! Finance reports, “was much steeper than its 2016 and 2017 losses, which had been $682.8 and $688.3 million, respectively.”

In his recommendation, White noted, “Lyft has a more focused geographical footprint and product portfolio than its largest competitor, but Lyft appears to be several years away from profitability.”

In addition to an uncertain future with regard to profitability, Lyft could also be upended by emerging competition. Aside from rival Uber, Lyft competes against less popular services, like Gett/Juno and Via as well as traditional taxicabs. In its IPO filing, the company noted that growing demand for shared scooters and bikes also poses a threat to the overall industry, though, not necessarily to Lyft. Lyft shielded itself against this threat by pouring millions into the acquisition of Motivate, which made Lyft the country’s biggest scooter and bike share operator in a deal that was valued at around $250 million, according to The Washington Post.

Among 70 potential downsides Lyft outlined for investors in its IPO filing with regard to its operation and the ride-sharing industry, the company also listed its heavy reliance on independent contractors working as drivers, uncertainty over the popularity of self-driving cars, and potential regulation over the concern of increasingly crowded streets and curb space as additional risks that it — as well as the ride-sharing industry — faces. A court ruling, for example, could force Lyft and Uber to classify their drivers as employees rather than independent contractors, bringing with it additional costs.

Another cause for potential risk — if not also a concern — is the limited voting rights shareholders will have. Lyft’s co-founders Logan Green and John Zimmer will retain control of the company “thanks to their ownership of a special class of shares that gives them 20 times the voting power of regular shareholders, despite each of them owning less than 3 percent of the company,” according to The New York Times.

A coalition of institutional investors questioned the arrangement, saying it “imposes a significant gap between those who exercise control over the company, and those who have economic exposure to the consequences of that control.”


Possible Rewards

In its IPO filing, Lyft disclosed that both its revenue and market share had jumped substantially on account of Uber’s disastrous public relations efforts, which led to the departure of Uber founder and CEO Travis Kalanick. Uber’s setback catapulted Lyft’s market share to 39 percent in December 2018, nearly double what it was two years earlier. Lyft’s revenues increased nearly sevenfold, jumping from $343 million in 2016 to 2.2 billion in 2018.

Despite its strong numbers, Lyft can’t bank its future success on Uber’s shortcomings. Instead, the company has turned to the industry itself, highlighting in its IPO filing how it stands to benefit from continued growth of the on-demand car and driver business model. Like Uber, Lyft is betting on a driverless future, investing millions into research and development for self-driving cars, which could be less costly than splitting fares with drivers. While other tech giants, like Alphabet’s Waymo, are trying to capitalize on this trend, too, Lyft — like Uber — can claim an advantage.

The Bottom Line

U.S. consumers are spending roughly $1.2 trillion every year on personal transportation and the potential for continued growth remains. According to The Washington Post, U.S. market opportunity for ride-sharing companies could reach $105 billion by 2029, or “about four times the size of the historical domestic taxi and limousine market.”

Some analysts have cautioned against reading too much into the risks because there are too many assumptions about Lyft and about the ride-sharing industry to quantify.

Given all of the uncertainties and all of the hype surrounding Lyft’s IPO, the opening bell March 29 might ring in Lyft’s stock price at $75 just as White predicted. Those looking to turn a quick profit off of Lyft shares likely won’t. Those who can tolerate risk and are willing to stick with Lyft for the long haul, riding out market volatility, likely will.

For now, though, the risks seem to outweigh the rewards with Lyft. Whether you decide to go all in on its IPO shares or remain sidelined, at the very least, experts say Lyft’s public offering will test just how much Wall Street values the ride-sharing business model.


Lyft ipo, Uber ipo, and Sidecar investor suit

Lyft Gains, Sidecar Returns, And Drizly Makes It Rain

This Week In On Demand — Dec. 14, 2018

While you focus on tackling pre-holiday checklists, some of the most popular side hustle services have been busy raising money, preparing for IPO, and settling out of court.

From rideshare to roomshare, here’s what you missed this week in on demand.

Drizly Raises $34.6 Million

Drizly announced a $34.6 million series C funding round. Based in Boston, the company offers an app-based, on demand alcohol delivery service. Notable investors include Baird Capital and Tiger Global Managment, who led the series F Instacart round in November. They were also joined by Polaris Partners.

The company has experienced substantial growth this year. Along with the latest funding round, Drizly acquired its small competitor Buttery in July. It also revamped its leadership team by adding a new CMO and CFO, and welcomed a new CEO in August.

Uber Hires Morgan Stanley, Tests News Food Delivery Option, and Gets Hit With Sidecar Lawsuit

On Wednesday, news broke that Uber has hired Morgan Stanley to lead its IPO after filing its SEC paperwork last week. It’s also reported Goldman Sachs will assist.

Uber’s biggest competitor, Lyft, filed for IPO last week as well, so the race to go public is officially on.

Uber is also reportedly testing a new Uber Eats program. Dubbed Uber Eats Pool, the service promotes multi-customer ordering from a single eatery in each geographical area. All of the orders are delivered by one driver, and in exchange, the customers receive reduced rates. The programs testing phase is only available in India.

Unfortunately, the enthusiasm surrounding Uber’s progression towards IPO was dampened by a new lawsuit.

On Tuesday, Sidecar filed an antitrust claim against Uber in federal court. The rideshare company went out of business in 2015, which it asserts occurred as a result of illegal practices committed by Uber.

Uber denies the claims, but Sidecar investors likely have a decent case given Uber’s past behavior.

While it’s unlikely the case holds up Uber’s IPO, it would still make sense for Uber Chief Legal Officer Tony West to settle the matter prior to going public.

Lyft Earns Self-Driving Vehicle Patent, Launches D.C. Grocery Program, and Showcases Market Growth

On Tuesday, Lyft’s autonomous vehicle communication patent was granted by the U.S. Patent Office. Developed as part of its Level 5 self-driving division, the design utilizes the vehicle’s windows to display messages to pedestrians as well as other roadway traffic. Uber filed its own self-driving correspondence patent earlier this year, but its display relies on light and auditory signals.

Along with technological innovation, Lyft is working to make grocery shopping easier for families that live in areas with minimal food options. Through a new partnership with Martha’s Table, Lyft is offering trip rates of $2.50 to and from certain grocery stores in Washington, D.C. The pilot program becomes available in January for 500 invited families.

As if the week could get any better, Lyft’s customer base is also reportedly growing much faster than Uber’s. A newly released report shows that the company now controls over 28 percent of the rideshare market. While Uber still maintains a solid grip at 69.2 percent, they lost three percentage points to its biggest competitor. The news serves to further fuel the competitive fire between the two organizations.

Airbnb and Aimco Find Common Ground

Earlier this week, Airbnb and property management company Aimco announced they’ve reached a legal agreement after over a year of disputes. Last year, Aimco filed two lawsuits — one in California and one in Florida — against Airbnb for allowing tenants to rent out its Aimco properties through the platform.

The California case was dismissed in January, and now, Aimco has agreed to drop the Florida case after reaching a settlement with Airbnb.

Not all of the details are known, as the only information released came in the form of a joint statement. However, the two parties disclosed they’re planning to discuss future business partnerships pertaining to multifamily housing. Chalk this one up to Airbnb going lawsuit housecleaning prior to their IPO next year.

Upwork and Microsoft Partner Up for Freelancing Tool

Upwork and Microsoft have partnered to new create a free product offering called Microsoft 365 Freelance Toolkit. The system allows companies to give contractors access to internal tools all at once, as well as revoke them when the contract ends.

The toolkit also makes it easier for companies to find and hire Upwork contractors. While the product is designed with businesses in mind, it will assist freelancers in their collaborative efforts.

While rideshare dominated this week in on demand, there’s still plenty of time before the next round of holidays for other industries to make waves. Check back next week to stay up-to-date on the latest on demand happenings.


Lyft hires express drive

Lyft Expanding Express Drive, Customer And Driver Support

Lyft’s Active Summer and Fall: Express Drive, Driver Coaching, And IPO Hires

It’s been a busy second half of the year for Lyft. Just last week, announced their purchase of Blue Vision, an augmented reality company. The company will fall under Lyft’s Level 5 Engineering Center headed up by Luc Vincent. Blue Vision specializes in 3D mapping and augmented reality, which should dovetail nicely with Lyft’s autonomous vehicle program.

Earlier this summer, Lyft announced Lyft Pitch, a competition for driver entrepreneurs offering $30,000 in prizes. As one in five Lyft drivers are also entrepreneurs, the D.C. based competition has generated a lot of excitement. The winner will be announced November 14th at the Blind Whino SW Arts Club. The competition may expand to other cities next year.

Lyft also recently announced plans to go public in the first half of next year, with J.P. Morgan, Credit Suisse, and Jeffries working on the listing.

However, the big summer Lyft news for drivers was the announced expansion of their popular Express Drive rental car program, and the $100 million investment in new, state of the art, driver support centers. This expansion is being led by Karim Bousta, Lyft’s VP of Driver Experience. He started at Lyft in May after a successful tenure as Tesla’s VP of Worldwide Service & Customer Experience.

Lyft Wants More Drivers Using Express Drive

This week, Lyft announced a further planned expansion of the Express Drive program. While Lyft Express Drive is already available in more than 30 cities, with more on the way, Lyft has bigger plans in mind. The company is not only aiming to double their Express Drive fleet. They eventually want to build a rental car program where even if someone has a car, they primarily use an Express Drive vehicle to Drive With Lyft. This is a substantial change from the way rideshare companies operate today.

Lyft has already partnered with Avis, Hertz, and Flexdrive on their Express Drive program. But in order to make Express Drive the most popular choice for Lyft drivers, the company knows the program will need sufficient driver support infrastructure.

New Express Drive Hires

To that end, Lyft has continued its recent hiring spree.

Chris Donus has joined Lyft as VP of Express Drive. He was previously the President and COO of Silvercar (helping to secure Series A funding). He’s also held positions executive positions at Freescale Semiconductor and Hertz. He will report to Karim Bousta as the work to expand the Express Drive program.

Lyft has also hired Rajiv Bhatia as Head of Driver Product. He was previously VP of Product at Altschool and has also held product and management leadership roles at Zynga. He will report to Ran Makavy, EVP of Rideshare Technology. Rajiv will lead management of the Lyft driver app, support, safety, insurance, as well as Lyft’s fleet management products.


Three New Driver Support Centers On The Way

In terms of physical infrastructure, the Lyft Express Drive expansion includes the construction of new Lyft Driver Support Centers, also called Lyft Hubs.

Lyft’s new driver centers will play a major role in the Express Drive expansion, providing support to drivers on and off the road. The goal of the support centers is to help drivers reduce costs while maximizing earnings. While the new support centers will continue to offer access to the Lyft support team, many of the new centers will offer discounted oil changes and electric vehicle charging stations. The will also provide a place for drivers to socialize or recharge, with refreshments and clean bathrooms.

Lyft Driver Support Center 2018


The first three new Lyft hubs will break ground before the end of 2018. Check back with us over the next few weeks to learn where the first three new Lyft Hubs will be.