Steering Lyft’s IPO: What Investors Will Weigh During the Roadshow

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themselves, or it might serve as the consumer-facing ride-hailing app in a partnership with a car manufacturer or other fleet operator. It already partners with GM (NYSE: GM), which owns a 6.7 percent stake in the company, as well as Ford (NYSE: F), Aptiv (NYSE: APTV), and others.

Lyft says its fate may hinge on its ability to develop its own self-driving cars, and to compete with other companies aiming at the same goal. But will potential IPO investors see this as a profitable way for Lyft to shed the financial burden of paying drivers? The move would require billions of dollars in capital to create autonomous vehicle fleet networks—and then the company would have to garage the vehicles, repair them, insure them, and so on—all to compete with rivals to deliver a commodity service (rides) while consumers make their choices based mainly on price.

Brand Equity

Many consumers were so turned off by 2017’s rash of bad Uber press that a #DeleteUber social media campaign took root, causing Lyft’s biggest competitor to reportedly lose half a million users during one especially bad week. Although some consumers are loyal only to low prices, Lyft has historically been seen as a friendlier brand than Uber, especially among millennial and Generation Z riders. (To be fair, Uber CEO Dara Khosrowshahi, brought in after founder Travis Kalanick resigned as CEO in 2017, has been trying to rehabilitate Uber’s image.) Whether Lyft’s brand equity will translate to Wall Street confidence remains to be seen, but the company believes its positive reputation with users is a significant part of its value.

Trendspotting

Lyft makes clear in its prospectus that there are macro trends favorable to ride-hailing: In short, young adults who live in places with multiple transportation options are less eager to own cars or even to drive than their parents—a trend affecting the automotive industry as well. The harmful effects of climate change also loom large.

“In 2018, almost half of our riders reported that they use their cars less because of Lyft, and 22 percent reported that owning a car has become less important,” the company says in its SEC filing. “As this evolution continues, we believe there is a massive opportunity for us to improve the lives of our riders by connecting them to more affordable and convenient transportation options.”

Lyft will have to be diligent—and convincing—about presenting that message during its roadshow, and Brugeman says it’s an area where the company has already had some success. “Lyft has been more proactive in discussing societal and sustainability goals—they’re better at talking about it,” she adds.

As the financial, tech, and automotive industries wait eagerly to see if Lyft will reach its reported potential IPO valuation of $20 billion or more, a successful offering could be a major turning point signaling the reality of an autonomous future. Or it could be an emperor-wears-no-clothes reality check for the mobility industry.

As Brugeman says, “Lyft has a lot going for it, but the [ride-hailing] industry in general has challenges. It will be very interesting to see how it all shakes out.”

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