One of the consequences of the government shutdown was that it froze the initial public offering (IPO) market. But, of course, this is no longer a factor — and yes, Silicon Valley dealmakers are working hard to launch deals. Perhaps the first high-profile offering will be ride-sharing operator Lyft. According to a report in the Wall Street Journal, the IPO is expected to hit the markets at the end of March.
And yes, the timing looks spot-on for the Lyft IPO. Keep in mind that Uber is also planning a deal soon, which could suck up huge amounts of capital. Some estimates call for more than $20 billion. In other words, with the Lyft IPO coming out first, there’s a better chance of not getting squeezed and overshadowed.
Also, note that there will likely be a flood of other 2019 IPOs. Just this week, Pinterest confidentially filed for its offering. The deal, which is led by Goldman Sachs and JPMorgan, is expected to be valued at a minimum of $12 billion. There has also been an IPO filing for Slack, which is a fast-growing collaboration app.
Next, another big reason that the Lyft IPO should fare well is that the overall markets have pulled off an impressive bounce back. There has been strength with fast-growing tech companies like Zscaler (NASDAQ:ZS), Smartsheet (NYSE:SMAR) and Elastic (NYSE:ESTC). Based on data from Dealogic, the tech companies that went public last year are up an average 33%.
For the most part, Wall Street is hunkering for new deals.
Backgrounder on the Lyft IPO
The filing has yet to be filed; rather, it looks like it will come out next week. Yet there is still a decent amount of information that is publicly available.
Lyft, which was founded by Logan Green and John Zimmer, got its start in 2012 (this was two years after Uber). Interestingly enough, the original focus was on long-distance ride sharing. But the founders realized that the real market opportunity was in cities. To help pump up growth, Lyft also leveraged partnerships, such as with companies like General Motors (NYSE:GM) and Tata Motors (NYSE:TTM).
Unlike Uber, Lyft has been focused primarily on the U.S. market. But Uber still has a commanding lead, with about 69.2%.
Then again, this means there is a large opportunity to cut into this. Keep in mind that customer loyalty for ride-sharing services is tenuous. Uber has actually lost 3% in market share since October, according to Second Measure (this is based on credit and debit card data).
What’s more, Lyft is growing at a rapid clip. During the first half of last year, revenues spiked by 88% to $909 million. The company offers its service across more than 300 cities.
Although, the company is still losing money. For the first half of 2018, the net loss was $373 million, up 46% on a year-over-year basis.
Bottom Line On Lyft Stock
Lyft’s stock will be listed on the Nasdaq and the valuation is expected to range from $20 billion to $25 billion. However, until we get the S-1, it’s tough to get a sense of what a reasonable valuation should be. Sometimes the details can be surprising.
All in all, when it comes to IPOs in general, investors should be cautious. These deals can easily flame out, as we’ve seen with Zynga (NASDAQ:ZNGA), Groupon (NASDAQ:GRPN) and Snap (NYSE:SNAP).
Regardless, the Lyft IPO will certainly garner lots of buzz — and also provide us with a good indication of the appetite for public offerings.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
