Chennai: US-based transportation network company Lyft Inc was valued at $24.3 billion in the first initial public offering (IPO), raising more than it had set off to do as investors overlooked uncertainty over its path to becoming a profitable company.
Lyft’s IPO sets the stage for the stock market debut of larger rival Uber Technologies Inc, which will kick off in April. Uber has been told by its investment bankers that it could be valued at as much as $120 billion.
Beating odds
The success of the IPO came despite Lyft’s steep losses, criticism of its dual-class share structure and some concerns over its strategy for autonomous driving, for fear of missing out on the company’s strong revenue growth, state reports.
The ride-hailing industry is expected to grow rapidly in the coming years, as young millennials in big cities choose not to buy their own car. Yet the sector is fraught with questions about the future of automated driving, regulatory pushback and legal challenges over drivers’ pay and benefits.
Lyft’s valuation makes it the biggest company to go public since Alibaba Group Holding Ltd in 2014. It paves the way for other Silicon Valley companies seeking to float in the stock market this year, including Pinterest Inc, Slack Technologies Inc and Postmates Inc.
Lyft raised $2.34 billion its IPO. It said it priced 32.5 million shares, slightly more than it was offering originally, at $72, the top of its already elevated $70-$72 per share target range. Lyft started its IPO investor roadshow earlier this month with a target range of $62-$68 per share.
According to reports, with start-ups like Lyft staying private for longer, there is a backlog of demand to allocate more money to stocks which are considered high-growth in order to diversify away from Wall Street’s FAANG trade which is made up of Facebook Inc, Amazon.com Inc, Apple Inc, Netflix Inc and Google parent Alphabet Inc.
So far…
Lyft, which was valued at $15 billion in final private fundraising round in 2018, kicked off its 10-day IPO roadshow on 18 March. The company’s executives made stops in cities such as New York, Baltimore, Kansas and Los Angeles. The IPO was oversubscribed after just two days. It has now nearly 40 per cent of the US ride-sharing market, according to its regulatory filing. The firm also operates in Canada.
Lyft was launched in 2012 and its revenue was $2.16 billion for 2018, double the previous year’s and far higher than $343 million in 2016. It posted a loss of $911 million in 2018 versus $688 million in 2017.
| What about Uber? |
| Uber Technologies Inc. is planning to kick off its initial public offering (IPO) in April, close on the heels of smaller rival Lyft.
Next month, Uber will issue its required public disclosure, known as an S-1, and launch its investor roadshow, reports state. The close proximity of the two IPOs could test the public market’s appetite for ride-sharing investments, reports state especially since Uber is most likely set to be valued at $120 billion. Uber was most recently valued at $76 billion in the private market, is seeking a valuation as high as $120 billion, although some analysts have pegged its value closer to $100 billion based on selected financial figures it has disclosed. |