Lyft, the ride-share company, is racing toward its initial public offering (IPO).
The company, which along with rival Uber, has upended the taxi and limousine industry, is seeking as much as $2 billion dollars from its upcoming sale of stock to the public, according to its stock prospectus.
Here are some key details:
- Lyft expects its stock to debut at a range between $70 and $72, according to its prospectus.
- The company has set a target valuation of up to $23 billion. That means the company hopes to be worth that much when it sells its shares to the public in April. How do companies set a valuation? They take into account a combination of things in the business, such as assets, or the things it owns, as well as stock price, earnings and cash flow.
- Lyft had revenue of $2.2 billion in 2018, double its sales in 2017.
- The company lost nearly $1 billion in 2018, according to its SEC filing, an increase of 32% compared to its losses for 2017. When companies lose money rather than make money, it’s often not a good sign for investors. However, many successful companies—Amazon for example—regularly report losses as they launch new products and services and grow.
A competitive ride-share market
Lyft’s biggest rival Uber also plans to go public this year, and is likely to surpass Lyft with a valuation of $120 billion, according to reports. As Lyft ventures into scooter and bike sharing, as well as new technology such as self-driving cars, it faces a raft of other competitors such as Apple, BMW, and Google, as well as Baidu, Waymo, and Lime.
Lyft says in its regulatory filing, the ride-share market in the U.S. is potentially as big as $1.2 trillion.
Two types of shares
Lyft will list two types of shares. It will sell class A shares to the general public, and will maintain class B shares for the company founders and other company insiders. The class B shares have 20 times more voting rights than the class A shares. Increasing numbers of Silicon Valley startups have used this so-called dual-class share structure, which enables owners to maintain control of their companies indefinitely.*
Lyft has nearly 40% of the U.S. ride-share market, according to reports. According to Lyft’s filing, it had 30 million riders and 1.9 million drivers in 2018.
Logan Green and John Zimmer co-founded Lyft in 2007. Following the IPO, the value of their stock is estimated to be worth $570 million and $390 million, respectively.
*Note: It’s important to remember that all investing involves risk, and that it’s possible for stocks, bonds, and other securities to lose their value due to changing market conditions. Additionally, following an IPO, the market price for the newly issued security, or stock, may be subject to significant fluctuations in response to factors such as lack of liquidity, as well as market and price volatility. Oftentimes, fluctuations are due to the expiration of a lock-up period where company insiders such as employees sign an agreement that prohibits them from selling shares for a specified period of time (in the case of LYFT this is 180 days). When lock-up periods expire, all insiders tend to sell their stock in order to realize profit, depressing the stock price in the process.