Lyft (NASDAQ:LYFT) stock is up more than 15% this week following rumors of a General Motors (NYSE:GM) acquisition. However, neither company has confirmed the rumors, although they share a storied past. LYFT stock is also being buoyed by New York’s recent decision to end the mask mandate on public transportation.
In 2016, Lyft raised $1 billion in a funding round, of which $500 million was attributed to GM. As part of the funding, GM also partnered with the ride-sharing company with a long-term goal of deploying self-driving cars on Lyft’s platform. At the time, the automaker characterized ride-hailing as the fastest-growing new transportation model. General Motors also offered to buy out the company for an undisclosed amount, though the offer was declined.
Here’s what LYFT stock investors should know as new buyout rumors swirl.
LYFT Stock in Focus on GM Acquisition Rumors
Fast forward to 2019, the year that Lyft became a publicly traded company. By then, GM’s investment — equivalent to 18.6 million shares — was valued at at least $1 billion. Meanwhile, Lyft’s initial public offering (IPO) price was set to $72 per share. Today, however, General Motors’ stake in the company is unclear; its last 13F filing as of June 30 shows no ownership of LYFT stock.
That said, an acquisition by the automaker could provide synergies for both parties. Earlier this year, GM acquired an 80% ownership stake in Cruise, an autonomous robotaxi developer. GM dished out $2.1 billion for the stake and promised to provide $1.35 billion of funding.
Meanwhile, shares of LYFT stock are down more than 55% year-to-date (YTD) and have fallen by over 70% since the IPO. That spells trouble for the company, but can be seen as a positive for parties interested in acquiring it at a discount. Still, it appears that Lyft is slowly recovering from a slowdown of rides caused by the pandemic.
During the second quarter, revenue tallied in at $990.7 million, up 30% year-over-year (YOY). Lyft also reported its highest adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of all time of $79.1 million. Analysts had expected a mere $18.1 million. On top of that, active riders increased 16% YOY to 19.9 million, “the highest since the start of the pandemic.”
For now, it appears that the GM rumors are just speculation. But a combination of the two companies would certainly send shockwaves through the ride-sharing industry.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.