Countdown to Lyft IPO: Valuation Increases to US$23 Billion

Ridesharing company Lyft began its initial public offering roadshow Monday (March 18).

As the most anticipated IPO since Snapchat (NYSE:SNAP) in 2017, shares are already oversubscribed from investors according to Reuters. Lyft’s IPO is scheduled for March 29.

With the two-week IPO beginning Monday, roadshow underway, investor enthusiasm has raised the IPO’s value from $21 billion to $23 billion over a two-day timeframe. The current price range set by the company is between $62 and$68 per share.

Lyft filed its S-1 prospectus to the Securities and Exchanges Commission March 1, beating Uber to the punch in the race between the two companies going public. In a year anticipated to have several high profile IPOs, including Airbnb, Slack, Uber and WeWork, Lyft’s IPO presents a strategic move to perhaps prevent being overshadowed by its behemoth competitor, Uber. According to Second Measure, Uber controls 68.5 percent of US rideshare spending. Uber’s projected IPO is estimated to be valued at over US$100 billion.

Bloomberg reported on Wednesday (March 20) that D. A. Davidson analyst Tom White set $75 as a price target for Lyft. “Our buy rating reflects LYFT’s impressive recent US market share gains and momentum, the continued growth/expansion of the broader Ridesharing market, and the stock’s reasonable EV/Sales multiple,” White said in a note according to Barron’s.

The S-1 reported the company’s 2018 revenue figures, objectives and discussion of its financial condition. This is the first time that Lyft has released financial results since it was founded in 2012.

In its financial reporting debut, Lyft reported that revenues doubled from $1.1 billion to $2.2 billion last year. Lyft reported almost $1 billion in losses for the year, with the prospectus mentioning that, “[s]ince our inception, we have generated negative cash flows from operations.”

In a thorough analysis of Lyft’s S-1, Hubert Horan, a transportation expert, wrote in his blog, “Lyft’s prospectus makes no attempt to provide investors with data-based explanations of how it could achieve sustainable profitability or strong ongoing equity appreciation. One presumes that the stated $20-25 billion valuation targets simply reflect the financial ambitions of Lyft’s owners and investment bankers. Even if one uses the crude metrics such as multiples of revenue often used for valuation guestimates, these targets implausibly imply future appreciation potential stronger than Facebook’s (NASDAQ:FB).”

The prospectus further shows that the most significant boost to Lyft’s margin was from decreasing driver share of compensation. Between 2017 and 2018, Lyft increased its gross fare from 24 percent to 27 percent.

In September, Lyft began employing Salesforce (NYSE:CRM) solutions to its business to gain greater insights on its customer base, harnessing Salesforce Pardot and Sales Cloud to improve customer loyalty.

Lyft has also partnered with Magna (NYSE:MGA), in a joint venture towards developing autonomous cars. The multi-year contract further details Magna investing US$200 million in Lyft last March. “Together with Magna, we will accelerate the introduction of self-driving vehicles by sharing our technology with automotive OEMs worldwide,” said Lyft CEO Logan Green in the press release. “This is an entirely new approach that will democratize access to this transformative technology.”

Ushering in the first major IPO of 2019, it will be unclear how other major offerings will follow. Lyft’s offering may set the stage for other companies to provide more visibility to its financial details.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.