Skip to main content

An illuminated sign appears on the dashboard of a Lyft ride-hailing car in Los Angeles on Sept. 21, 2017.

Chris Helgren/REUTERS

Lyft Inc. was valued at US$24.3-billion in the first initial public offering of a ride-hailing startup on Thursday, raising more than it had set off to do amid strong investor demand.

Lyft’s IPO sets the stage for the stock market debut of larger rival Uber Technologies Inc., which sources have said is coming in April. Uber has been told by its investment bankers that it could be valued at as much as $120-billion.

The success of the IPO indicates many investors were willing to overlook uncertainty over Lyft’s path to profitability and its strategy for autonomous driving, for fear of missing out on Lyft’s strong revenue growth.

Story continues below advertisement

“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.

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 that it was offering originally, at US$72, the top of its already elevated US$70 to US$72 a share target range. Lyft started its IPO investor road show earlier this month with a target range of US$62 to US$68 a share.

The stock is set to begin trading on the Nasdaq on Friday under the symbol “LYFT.”

The IPO market had a slow start in 2019 due to volatile markets at the end of last year and the government shutdown in January blocking U.S. regulators from processing new IPO applicants.

With startups 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.

Story continues below advertisement

Nevertheless, there are concerns among some investors that these IPOs may be coming at the peak of the market, when the benchmark S&P 500 Index has risen more than 200 percent since 2008.

“They’re buying at the top of a bull market that’s lasted for nine years,” said Roberts.

PROFITABILITY QUESTIONS

Lyft, which was valued at US$15-billion in final private fundraising round in 2018, kicked off its 10-day IPO roadshow on March 18. The company’s executives made stops in cities such as New York, Baltimore, Kansas and Los Angeles. Reuters reported the IPO was oversubscribed after just two days.

Lyft’s revenue was US$2.16-billion for 2018, double the previous year’s and far higher than US$343-million in 2016. It posted a loss of US$911-million in 2018 versus US$688-million in 2017.

Lyft was launched in 2012 and is led by its founders, Logan Green and John Zimmer. The company has not laid out a timeline for when it will turn a profit, but stock investors have shown patience in the past if they feel the growth will pay off, with companies like Amazon staying in the red until years after its IPO.

Lyft is smaller than rival Uber and so far has focused on the U.S. and Canadian markets. Uber, a global logistics and transportation company most recently valued at US$76-billion in the private market, is seeking a valuation as high as US$120-billion, although some analysts have pegged its value closer to US$100-billion based on selected financial figures it has disclosed.

Story continues below advertisement

Unlike Uber, which has developed its own self-driving division, Lyft has chosen to strike partnerships to expand in the sector, including with car parts suppliers Magna International Inc. and Aptiv PLC. General Motors Co. is an investor in Lyft.

Related topics

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter