- Lyft has officially filed for its initial public offering, meaning the company should be going public at some point in 2019.
- The company’s most recent funding round valued it at $15.1 billion.
- Despite rapid growth, Lyft is losing money at a rapid rate as it battles with Uber for market share.
Pretty soon, anyone who wants to will be able to hop on board with Lyft: not just its car service — which has been available to the public for years — but investing in the company. Lyft announced on Thursday, Dec. 6, that it had filed its Form S-1 with the Securities and Exchange Commission to go public.
Although there is still quite a way to go before you can invest in Lyft stock, the filing indicates that the company should be publicly traded by mid-2019. The company’s last cash raise — $600 million in late June — pegged its valuation at $15.1 billion.
So, does this mean the average investor should start saving up so that they can grab shares in the ride-sharing company on the first day it hits the stock exchange? Maybe not. Although there are plenty of reasons why Lyft bulls believe it’s a great investment, there are also some red flags that might give others pause before they start shelling out money for the stock. Here are three reasons why you might reconsider your pending investment in the Lyft IPO.
1. Lyft Is Losing Money — a Lot of It
Privately held companies like Lyft don’t have to regularly report financial information like publicly traded firms do, but a recent piece in The Information, a site that covers the technology industry, included financial information from the first half of 2018 as passed along by someone familiar with the numbers. There, Lyft was revealed to have had losses of $373 million for the first six months of 2018.
Although it’s suffered major financial losses, Lyft’s revenue did grow by a whopping 121 percent, so there are signs that the company is actually getting better at controlling its expenses. And it’s also not unexpected for a rapidly growing young company to be prioritizing growth over profits. However, any company with a run rate that’s nearly three-quarters of a billion dollars in the red on an annual basis has to be viewed as a fairly risky investment.
2. Lyft Is Not the Industry Leader
Of course, although Lyft might be the first in with its S-1, the ride-sharing elephant in the room remains Uber, which is currently much, much larger than its primary competitor. Uber’s valuation, meanwhile, has been pegged at as much as $120 billion, and its $2.7 billion in revenue for the second quarter was more than double Lyft’s revenue for the first half. If it sustains that rate for a full year — and if anything, it’s likely to continue increasing — that would mean Uber is hauling in close to $11 billion a year in revenue.
If Lyft wants to keep growing, it’s going to be going head-to-head with Uber every step of the way. Or, mile driven, as it were.
Business Moves: Lyft to Pilot Subscription Business Model Like Amazon and Costco
3. Falling Markets Could Undercut Near-Term Growth
It’s also worth noting that there are some serious headwinds for the entire stock market that could end up hurting a stock like Lyft after it goes public. Concerns about a looming recession, a trade war with China and slowing global economic growth have all conspired to send stocks south late in 2018.
A company like Lyft is going to fall into the category of a “cyclical” stock — or one that tends to rise and fall more with market sentiment — meaning that a bear market could hurt it more than other market players, especially after you consider the huge losses it’s posting. If more conservative investors are rethinking their portfolio for a falling market, the hot new IPO that’s burning through cash at a rate of over $60 million a month is probably going to be easier to let go of than more defensive stocks.
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