The Lyft IPO went off as planned on March 29, 2019. 32.5 million shares were priced at $72 per share, which created value for the company at just above $20 billion. The stock opened higher near the $90 mark but ended the day significantly lower with a close at $78.29, which was still above its IPO pricing.
Lyft IPO Stocks
Beating Competition To The Market
Using the stock ticker “LYFT,” the company beat a major rival to the market by having its company publicly traded first. As a ridesharing company that can be used as an alternative to hailing down a taxi, an independent driver who works for the company picks up passengers and transports them to their destinations.
To use the service provided by Lyft, a passenger utilizes their smartphone and the Lyft app. Passengers can schedule rides through the app and also make payments using the platform after they reach where they are going.
A Decade Of Business And Hurdles Before The IPO
John Zimmer and Logan Green launched Lyft in 2012 after trying to start a service called “Zimride,” which only focused on shared rides taken at college campuses for long-distance trips. San Francisco became the birthplace of the company in 2013 when Lyft raised an initial $15 million. Later that year, another $60 million was raised for the company, which helped get the service up and running
2014 was a rocky year for the company when it tried to launch its business in New York City. Known for its massive amount of taxi services, Lyft ran into problems with regulations in the city, which required them to take the appropriate steps needed for compliance. By 2014, the company had met the regulations and was allowed to launch its service. In mid-2017, the company started serving over 1 million rides each day in over 150 cities. In late 2017, the company decided to expand internationally and launched the service in Canada.
When Lyft presents accounting figures, it recognizes revenue on a net basis. This creates a top-line number for the company that is much lower than the amount of money taken in by the company from passengers over a specific period. Lyft considers its company as an “agent” that facilitates the connection between passengers and drivers.
Otherwise, it would report revenue on a gross basis. The argument for the company in handling its accounting this way is that it assists a third-party to provide a transportation service to a passenger when they need a ride under the stipulation that both the driver and passenger can reject the price of the ride.
Facing Competition And Revenue Growth
The Lyft IPO stock price may have been priced too aggressively considering it’s net loss figure in 2018. At the end of 2018, Lyft’s share of the market in the United States was at 39 percent. The company had grown its market share by 17 percentage points since 2016. Lyft was still reporting a net loss in 2018 as well. The following figures show the losses sustained by the company from 2017 to 2018, even though bookings had increased dramatically from the prior year.
- Bookings of $8.1 billion had increased by 76 percent since 2017
- Net loss of $911 million, which increased by 32 percent since 2017
- Revenues of $2.2 billion accounted for twice the revenue of the company since 2017
Continued Hurdles With The Company
Lyft ended up reporting a loss of about $900 million at the end of 2018. While the company has drastically changed the way that individuals can utilize transportation, its share price has been in a steady decline since the IPO. Shares for the company were trading at close to $37 in early October 2019, which is close to a 50 percent drop in value.