Lyft kicked off trading on Friday with a $24 billion valuation and quickly made its way over $28 billion. The company had priced 32.5 million shares late Thursday at $72 per share, valuing the company at more than $23 billion. The tech unicorn was earlier expected to price at a lower range between $62 and $68 per share.
The initial trade represents a 21% premium over the IPO price.
Founded by CEO Logan Green and president John Zimmer in 2007, Lyft launched its ride-hailing app in 2012.
At an opening price of $87.24 a share, Green's stake in Lyft is valued at about $730.5 million while Zimmer's shares are worth about $504 million.
Green and Zimmer will continue to control Lyft because most of their shares are in the form of Class B stock, which has super-voting rights. Green and Zimmer will have just under 49% of the voting power.
Japanese e-commerce giant Rakuten Inc (TYO:4755) has a 13% stake in Lyft that is now worth more than $2.7 billion. General Motors Company (NYSE:GM), Google owner Alphabet (NASDAQ:GOOGL) and mutual fund giant Fidelity have nearly 8% stakes in Lyft which are now worth a little north of $1.6 billion.
The San Francisco-based ride-hailing company’s IPO filing lifted the hood on its financials. Lyft's revenues doubled in 2018 to reach $2.2 billion, according to the contents of its S-1 registration with the SEC. That is up from $1.1 billion in 2017 and $343.3 million in 2016.
“The best thing about Lyft is its revenue growth rate and that fact that it’s a member of a duopoly,” equities and futures trader Bob Byrne told Proactive Investors. “But as far as valuation goes, the stock is extraordinarily expensive. If you’re buying Lyft today, you’re doing so because you’re an aggressive momentum trader trying to make a quick buck.”
Byrne who is also a Proactive Investors contributor advised investors to wait for the dust to settle.
“If you were able to get shares of Lyft at the IPO price and flip them on the open, good for you! But if you’re chasing the stock into the upper $80s, you’re buying from the folks that scored shares at $72," said Byrne. “Remember, with Uber, Pinterest, Slack, and Postmates all waiting to come public, there’s a good chance some of the momentum-oriented money that’s flowing into Lyft heads to the exit in short order to make room for these upcoming high-growth, but expensive IPOs.”
The stock is likley to see consolidation once the buying frenzy cools off. With more than 300 companies ready to go public and wanting to raise as much as $50 billion, Lyft shares could get stuck in traffic.
“If you’re an aggressive investor and want to trade Lyft, wait for it to consolidate its IPO gains for a few days and then buy the first push to new highs. By doing this you’ll have — at a minimum — a clear line in the sand to base your risk around,” said Byrne.
Despite big revenue numbers, Lyft, like rival Uber, is hemorrhaging money. Its net loss climbed to $911.3 million in 2018 from two years of steady losses of $682.8 million in 2016 and $688.3 million in 2017.
“The company is benefitting from being first to market, not in terms of product but stock. The $2.3 billion raised is much needed as the company is bleeding cash faster than an unattended ER patient with two-dozen bullet holes,” said trader and Proactive Investors contributor Timothy Collins.
“On the positive side, Lyft already held a strong $2 billion cash position, so despite the $2 billion in losses for 2018, not all of which were cash losses, they aren't in any danger of running on empty in the next few years. There's plenty of road left to compete for the $1 trillion+ transportation market, but with no profits in sight, the nearly $30 billion valuation is rich.”
Collins said the pricing appears “more about excitement and lack of float” than based on valuation. “Investors will want to remain careful around the hype and not forget it won't be long before we see the Uber IPO,” said Collins.
Gearing up for competition
Lyft claims its ridesharing market share grew to 39% in 2018, up from 22% in 2016. In the fourth quarter of 2018, it had 18.6 million active riders and 1.1 million drivers.
“Having launched in 2012, the company has seen remarkable growth since inception. However, competition is extremely high, and Uber already dominates on a worldwide basis,” said Jordan Hiscott, chief trader at Ayondo Markets Ltd. “The story for Lyft represents a gigantic change to how we use and see automobiles. Indeed, this is exciting for investors, but I would recommend caveat emptor!”
--Adds comments and additional details of the IPO--
Contact Uttara Choudhury at [email protected]