Lyft Raises $2.2B in IPO, Pegging Valuation at Over $24B

Xconomy San Francisco — 

Investors eager to bet on the mobility industry’s future handed ride-hailing company Lyft $2.2 billion in new capital Thursday as the company completed an IPO that set its market capitalization at $24.3 billion, The New York Times reported.

Lyft sold 30.8 million shares at $72 apiece, according to Renaissance Capital—the top of a new range that Lyft originally set at $62 to $68. The company was valued at $15.1 billion at the time of its last fundraising in mid-2018.

Lyft’s pricey showing rivals Alibaba’s 2014 IPO as one of the largest deal sizes ever among US IPOs, according to data from Renaissance Capital.

San Francisco-based Lyft’s IPO demonstrated that investors are willing to disregard mountains of red ink (a net loss that grew to $911.3 million in 2018) and take a chance on a mobility company that still faces significant challenges on multiple fronts going forward. The lure was the size of the potential market for a company willing to burn capital to attain scale. In its prospectus, Lyft valued the US market alone at $1.2 trillion a year as of 2017.

Lyft won the race to make its Wall Street debut ahead of its larger competitor Uber, becoming the first transportation-as-a-service company to go public. Neither ride-hailing company has outlined a clear path to profitability in the intensely competitive industry they helped launch by redefining transportation as a digital service.

Lyft’s favorable reception among investors may also boost Uber’s value when it floats its own IPO, expected later this year. Investment banks had estimated that Uber’s deal size could reach as high as $120 billion, though other observers rated it substantially lower early this year, according to the San Francisco Business Times. Still, the Lyft IPO sets an optimistic tone for other tech companies on the runway to the public markets, including Pinterest, Slack, and Zoom.

The task before both Lyft and Uber is to compete with each other as well as a host of other enterprises, including ride-hailing upstarts both in the United States and abroad; rival developers of self-driving cars; auto manufacturers; and mobility platforms that will vie to organize the host of activity centered on transportation services. These include everything from food delivery and scooters to video entertainment en route.

Now, under the eye of investors and other observers scrutinizing its quarterly financials, Lyft will also grapple with possible changes in the regulatory environment, perhaps spurred by drivers who push to be classified as employees, cities that may put limits on circulating ride-hailing cars to reduce traffic congestion, and data privacy advocates. New privacy protections might limit the value of the data collected by ride-hailing companies about passengers, their devices, and their travel patterns.

Lyft, which operates in the United States and Canada, has been gaining market share on Uber, which is emerging from a rocky period involving allegations of workplace sexual harassment, conflicts with drivers, and a court battle over intellectual property rights with Google’s self-driving car unit Waymo. That culminated with the departure of Uber’s founder and CEO, Travis Kalanick, in 2017, and the selection of former Expedia chief executive Dara Khosrowshahi to replace him. Lyft, which portrays itself as a friendlier and less-troubled option for riders, has attained a 39 percent share in its regions, but Uber still holds about 60 percent of that market.

Even an extra cash boost of $2.2 billion may give Lyft a short runway to demonstrate profitability, for a company that lost nearly $1 billion in 2018. Its long-term success depends on seizing market share, developing new business lines, possibly building a self-driving vehicle fleet, and scaling up each of these endeavors. All require big expenditures.

Lyft is set to start trading on the Nasdaq exchange Friday under the ticker symbol LYFT. Renaissance Capital says it’s likely that Lyft’s share price will rise during trading on Friday, based on past patterns.

“Over the past 10 years, 97 percent of the deals that priced above the (original) range traded up on their debut, with an average first-day return of 42 percent and a median of 33 percent. That compares to the overall average of 67 percent of IPOs finishing the first day positive, producing an average return of 13 percent and a median of 6 percent,” the IPO-focused firm said in a note.

“If you can get shares of Lyft, the odds are on your side. After the first day, it’s more of a mixed bag.”

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