Lyft shares surge on Nasdaq debut

April 01, 2019 09:25
Lyft's strong debut bodes well for the upcoming listings of Uber and other technology firms in the United States. Photo: Reuters

Lyft shares soared as much as 23 percent in their market debut on Friday, signaling strong investor interest in the ride-hailing startup that bodes well for the upcoming listing of larger rival Uber.

The stock opened at US$87.24 but later pared gains to close up 8.7 percent at US$78.29, giving Lyft a market capitalization of around US$22.2 billion, Reuters reports.

On Thursday, Lyft priced 32.5 million shares, slightly more than it was offering originally, at US$72, the top of its already elevated US$70-$72 per share target range, raising US$2.34 billion in its IPO.

Lyft’s offering ended up 20 times oversubscribed, similar to other high-profile IPOs, with more than 500 orders from institutional investors such as mutual funds, according to Reuters sources.

Public market investors, keen on Lyft’s revenue growth and after enduring a long stretch with few IPOs from highly valued tech companies, piled into the offering.

The IPO success came despite Lyft’s steep loses, criticism of its dual-class share structure, and some concerns over its strategy for autonomous driving and new laws aimed at lifting driver pay.

Lyft, as of December, had 39 percent market share in the US, up from 35 percent early last year.

But the firm's loss widened to US$911 million last year from US$688 million in 2017, even though revenue doubled to US$2.16 billion. The company has not laid out a timeline for when it will turn a profit.

Uber, which is also loss-making, would be valued at about US$128 billion at its IPO if awarded the same multiple as Lyft. Uber is planning to launch its IPO in April, sources told Reuters earlier.

Some of the companies’ losses come from subsidizing rides, a tactic to attract riders with discounts.

Lyft's IPO, which is the year’s biggest thus far, sets the stage for other Silicon Valley unicorns seeking to debut in the stock market this year, including Pinterest, Postmates and Slack.

Lyft Chairman Sean Aggarwal said on Friday that the company will continue to prioritize North American growth over international expansion after completing its IPO.

Uber is in more than 70 countries, although it has consolidated certain overseas markets, while Lyft has stuck to the US and Canada.

“Sticking with that playbook of owning this market (North America) and expanding in this market is how we get to deliver to our public shareholders and the long-term expectations that we set,” Aggarwal said on the sidelines of Lyft’s IPO celebration Friday.

Lyft has explored expanding its service to Australia and Mexico, sources previously told Reuters.

Aggarwal also said the firm's co-founders and top executives worked in recent weeks to make investors comfortable with Lyft’s dual-class share structure, which has faced criticism from some investors and corporate governance advocates.

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