Daily Management Review

Lyft’s US IPO Values It At $24.3 Billion


Lyft’s US IPO Values It At $24.3 Billion
While deciding to purchase shares of the US based ride hailing firm Lyft Inc, investors apparently ignored the troubles that it would potentially face in in its strive to become profitable which helped the company to be valued at $24.3 billion in the first IPO by a ride hailing company.
The success of the IPO of Lyft would certainly be a confidence booster for the larger ride hailing rival Uber Technologies Inc as the company prepares to launch its IPO, which according to reports, could be as early as this April. Investment bankers have told Uber that the IPO launch could value the company over $120 billion. 
Lyft’s steep looses, did not come in the way of its IPO being successful. The company has also been criticised because of its dual-class share structure and issued with its strategy for autonomous driving. Analysts feared that these could be dampers for investors because these could force the company to miss out on strong revenue growth
“In a good market, people look beyond things. They don’t see the problems as much,” said Brian Hamilton, co-founder of data firm Sageworks, speaking before the pricing.
There is expected to be rapid growth in the global ride-hailing industry because young millennials in big cities are choosing not to purchase their own cars and therefore they would depend on ride hailing services. But the industry is also froth with uncertainties about the future growth of automated vehicles and driving, regulatory criticisms and legal challenges over recognition of drivers as employees instead of contractors.
The huge valuation for Lyft is the largest for a company going public for the first time since the IPO launch of Chinese tech giant Alibaba back in 2014. The IPO launch of Lyft was also closely watched by other Silicon Valley companies because many of them are also planning to go public this year and includes names like Pinterest Inc, Slack Technologies Inc and Postmates Inc.
The IPO also provided Lyft with $2.34 billion at an initial price of $72 per share for the 32.5 million shares, which was just a bit more than the company had initially said it would offer. The target price of its stocks was between $62 and $68 when it had started its road show for the IPO.
The high volatility in the markets during the end of 2018, along with the longest government shut down in January, forced a slow start to the IPO market in 2019. The shut down prevented the processing new IPO applicants by the US regulator.
According to analysts, there has been a creation of a backlog of demand for allocating more money to stocks that are believed to be high growth ones so that investors are able to diversify away from investing in the Wall Street’s FAANG trade because of start-ups like Lyft choosing to remain private for longer. Facebook Inc, Amazon.com Inc, Apple Inc, Netflix Inc and Google parent Alphabet Inc make up the FANG list .
There are however some analysts who say that these IPOs are being launched when the market is at its peak as there has been an increase of 200 per cent since 2008 in the benchmark S&P 500 Index.
“They’re buying at the top of a bull market that’s lasted for nine years,” said Roberts.