IPO

Lyft Takes A Fall As Uber Hogs The IPO Spotlight

Initial Public Offering

The problems started earlier in the week for Lyft, as investors anticipated the release of Uber’s prospectus for its initial public offering, and Lyft’s stock price started to drop. By Friday (April 12) at 10 a.m. EST, hours after that document went public, that price dropped to $58.21 — about 19 percent below Lyft’s IPO offering of $72.

It’s not just that Uber was hogging the spotlight as it neared its own IPO, though that seemed to be a big part of it, given the reported confusion about how to exactly compare the two ridesharing rivals, whose metrics don’t exactly match up.

Part of the reason for the recent Lyft decline also reportedly could stem from the fact that both companies have a different scope and wildly different ambitions. Lyft seems content with ridesharing. Uber, going by its S-1 and its previous expansion efforts, tends to imagine itself as following in the footsteps of Amazon to achieve a much broader level of service and success.

Investor Views

That doesn’t mean investors have totally soured on Lyft, not if you go by the view reportedly offered by Wedbush Securities in the wake of the release of Uber’s prospectus. The firm gave Lyft’s stock a neutral rating and a 12-month price target of $80, according to CNBC. The firm’s analysts wrote that “now that Uber’s S-1 was released after the close yesterday we think investors don’t yet have a whole lot more clarity on some of the key comparable metrics.”

Take gross bookings as an example of where some of that confusion is coming from.

Uber in its IPO prospectus reported $11.48 billion for the fourth quarter of 2018, an approximately 25 percent increase for the same period in 2017. For the Uber Eats food delivery business, gross bookings increased about 129 percent year over year in the fourth quarter of 2018, reaching $2.56 billion. Those gross bookings include tips and surcharges imposed during busy times.

For the full year 2018, Uber has gross bookings of more than $50 billion, a 45 percent increase from 2017.

Lyft, in 2018, had gross bookings of more than $8 billion — certainly much less than Uber took in, but also a 76 percent increase from the previous year, outpacing Uber’s growth. That said, Lyft does not include tolls and surcharges, and has much less of a global presence than does its rideshare rival.

“We believe there could be continued pressure on Lyft shares while investors wait for Uber’s roadshow and dig further into the full financial metrics,” Wedbush analysts wrote, according to the report. “In our opinion, the battle for market share will be balanced going forward.”

Two Paths

There is no doubt, though, that Uber intends to keep growing in digital payments and commerce, and to take on much more than Lyft is willing to do. In fact, in a letter that came with the Uber IPO prospectus, CEO Dara Khosrowshahi wrote that Uber is “still barely scratching the surface when it comes to huge industries like food and logistics.” Compare that to recent comments from John Zimmer, Lyft’s co-founder, saying his company is “solely focused on consumer transportation.”

That said, Uber, for all its ambitions, has not yet made a profit (nor has Lyft). That’s raising fresh concerns this week, with one analysis finding that 81 percent of U.S. companies doing IPOs last year had yet to make any profit — the percentage for tech firms was even higher, at 84 percent. “In fact, the last time that large a percentage of tech firms were going public without making money was in 1999 and 2000, when 86 percent of the internet companies that turned to Wall Street were unprofitable,” the report reads, referring to the era’s dot.com bust. (That said, Amazon took more than a little while to post its first profit, of course.)

Buckle up. The ride toward Uber’s public offering should be an interesting one, as should the coming developments regarding Lyft and investor confidence in that ridesharing services provider.

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