Google Ad

Ride sharing company Lyft debuted on the stockmarket Friday up over 21% after setting the price for its stock at $72 per share late Thursday. IPOs can be boom or bust, In 2018 the most anticipated brands included Dropbox, Spotify and WeWork

 Lyft Opening Bell

Trades under the ticker LYFT. Competitor Uber is expected to go public later this spring.

The Debut

The stock opened at $87.24 and had a high of $88.60 before pulling back to $85.06 aftert the first 15 minutes of trading. On Friday the stock opened close to noon Eastern time, after it was expected to begin trading around 10:45 a.m.

The IPO Pricing

The Lyft price at $72 per share is at the high end of revision Lyft made after high investor demand prompted the company to increase its initial goal of $62 to $68, There are nearly 31 million shares to be sold in the IPO. The new price sets Lyft's market value at $24 billion going in to the listing this is up from $11 billion this time last year. For Lyft it paid to wait

Lyft has quietly seen a surge in growth since 2017. Some see the ride-hailing company as the anti-Uber, not a bad thing with all the negative drama Uber has garnished in the past few years. Lyft valuation of $11 billion came after it raised $1 billion led by the venture investment arm of Google's parent company, Alphabet. That deal boosted Lyft's valuation from $6.9 billion to $10 billion, from which it has continued to rise.

You would be forgiven in thinking everyone uses ride sharing but ride-sharing networks still account for less than 0.5 percent of all miles traveled in the U.S., according to John Zimmer, president of Lyft. That leaves a lot of story building at least for an IPO.

Debt and Fail Risk

Lyft has over $3 billion in debt since its 2012 inception on the premise that its growing popularity will pay off in the long run. The San Francisco company has not delivered a profit since co-founders Logan Green and John Zimmer started the service. Lyft hasacknowledgeds it may be many more years before it is profitable, A big risk there is if it's unsuccessful in developing a fleet of self-driving cars to lower its costs.

What Lyft will do with the IPO proceeds

In an earlier regulatory filing before the IPO priced, Lyft estimated it would raise $2.1 billion if the offering price is $71 per share. The company plans to use the offering proceeds for working capital, operating expenses, capital expenditure, future acquisition or investments in new products, services or technologies.

GM a Winner

A big winner here looks to be one of its biggest investors in General Motors who invested $500 million in Lyft in January 2016 and holds 18.6 million Class A shares of the company.

Analysts Comments

Ygal Arounian, a senior research analyst at Wedbush Securities issued a "neutral" rating on LYFT and put a price target of $80 on it.

"This IPO is a 'watershed' event for the tech sector as well as the ridesharing industry that in our opinion has become one of the most transformational growth sectors of the US consumer market over the past five years," they wrote. They noted that Lyft is now established "as the clear #2 player behind the worldwide leader Uber."

Arounian expects the company to continue to invest in autonomous driving technology and more bike- and scooter-sharing opportunities. In November, Lyft acquired Motivate, the largest bike-share service in the U.S. It operates New York’s City Bike, San Francisco’s Ford GoBike, Chicago’s Divvy and Washington, D.C.’s Capital Bikeshare, among others.

What About Uber?

Lyft’s IPO isthe first of several highly valued tech companies going public soon, including Pinterest and Lyft’s main competitor and the No. 1 ride-hailing company, Uber. Uber is expected to file for an IPO soon. It was last valued at $72 billion, the IPO value could climb as high as $100 billion to $110 billion, depending on the success of Lyft analysts tout.

Source: Lyft, TradersCommunity

From The TradersCommunity Research Desk

Log in to comment
Discuss this article in the forums (15 replies).