Though Uber has touted the possibility of an IPO in the near future, its smaller competitor Lyft seems to have taken the lead in this particular race. The company has confidentially filed a draft registration statement for its proposed initial public offering (IPO) with the US Securities and Exchange Commission (SEC), which puts it one step closer from going public.
But investors cannot bid for Lyft stock yet. This is just a draft of the potential IPO the company might release, submitted to the SEC to be reviewed and receive feedback, according to detailed financial statements. The number and price of the stock is yet to be determined but valuations from banks including JPMorgan Chase, Credit Suisse and Jefferies Financial Group range from US$18 billion to US$30 billion, while the company’s private valuation positions Lyft at US$15.1 billion.
Lyft and its competitor Uber have attracted the interest of investors as two of the largest unicorn companies in the US. The title of unicorn is given to any startup capable of reaching a value of at least US$1 billion. Though both players have succeeded in this, they have also succeeded in burning through copious amounts of money in an effort to continue growing. According to a report from Reuters, though Lyft managed to double its revenue in the first half of 2018 reaching US$909 million, its net losses also grew by 46 percent for a total of US$373 million.
Arranging an IPO under such circumstances will mean investors will have to decide if they are willing to invest in such capital-intensive and potentially risky ventures. There is already a precedent if we consider Tesla’s performance and how the company has raised capital in several occasions to remain afloat. However, in the case of companies like Lyft and Uber, their value proposition is not backed up by a tangible product with an inherent value but in a digital service.
Uber’s case is much more complicated considering that, unlike Lyft, the company had multiple management issues before the arrival of current CEO Dara Khosrowshahi. Furthermore, the company has branched out considerably from its initial value proposition and has now become a disruptor not only for ride-hailing services but for all alternative mobility options.
The company is still seeking its IPO, which Khosrowshahi says is on track for 2019. The CEO even says there are no concerns regarding Lyft’s earlier entrance to the stock market. “There is enough demand for both companies,” he said in September.
The data used in this article was sourced from Automotive News, PR Newswire, Bloomberg and Reuters.