4 Mar 19

Lyft beats Uber to file IPO

On Friday, Lyft filed for an initial public offering (IPO). In doing so, Uber's smaller rival won the race to be the first major ride-hailing company to launch on the stock market. The stock is likely to go on sale in late March or early April.

Operating in many countries around the world, Uber is the global ride-hailing market leader. Lyft is much smaller: so far, it operates only in the U.S. and Canada. - but it has managed to grow its market share in the U.S. from 22% in December 2016 to 39% in December 2018, making it a serious competitor for Uber in its home market.

1 billion rides
For 2018, Lyft reported 1.9 million drivers in more than 300 cities, transporting 30.7 million riders. Since its start in 2012, the company has provided more than 1 billion rides. Last year, the company was valued at $15 billion. Apart from ride-hailing, the company also offers shared car, bike and scooter rides.

The competition between both providers is interesting for customers, as it is keeping the prices for ride-hailing services relatively low. The strong competition is also preventing both companies to price themselves into profitability. Uber is famous for racking up huge losses, and Lyft is also still a money-losing proposition.

$911 million losses
Revealing its financial details for the first time on Friday, Lyft reported $2.2 billion in revenue in 2018, more than double its $1.1 billion in revenue in 2017. Lyft took in just $343.3 million in 2016. But the company has yet to turn a profit and lost $911 million last year (bringing its total losses to nearly $3 billion since 2012). 

Having raised more than $5 billion in funding, Lyft is now seeing its cash reserves dwindle: at the end of 2017, the company has about $1 billion in reserves, by the end of last year, that amount had shrunk to $517 million. 

The IPO is a way to raise more cash. However, following its entry into the stock market, Lyft will have to take into account the wishes of its shareholders. This is likely to change the company's focus, away from growth at all cost (even at the expense of profit).

Dual-class stock
However, that is not to say the situation will be totally reversed, with the focus on profit at the expense of growth. Lyft is planning to issue dual-class stock, with the so-called B shares granted more votes. Its co-founders, CEO Logan Green and President John Zimmer, will be the only ones with B shares, thus retaining control of the company, even though they will have less than half of the total stock.

Nevertheless, Lyft is likely to attract huge interest from institutional investors eager to get in on the profit potential of the ride-hailing industry. Assuming steady revenue growth, experts say Lyft could be valued at as much as $25 billion by next year. 

Authored by: Frank Jacobs