It was a great IPO debut for Lyft as its shares rose more than 23 percent on the opening day of its trading. The company witnessed a very strong investor demand on Friday when it offloaded its shares on the NASDAQ stock exchange. This marks the first time that a ride-hailing service has gone public in America. All this brings positive news for Uber, who plans to go public in April. The strong investor turnout will certainly embolden the ride-hailing giant from America.
Lyft Inc’s IPO is America’s biggest initial public offering in 2019 thus far. It is the perfect way to welcome Silicon Valley’s unicorns into the stock market, as a considerable among of the latest unicorn companies plan to go public by the end of 2019.
The success of Lyft’s IPO may surprise a few as the company is yet to record a profit in its almost seven-year-long history. Investors were hyped about Lyft’s IPO debut as the market had seen very few stock offerings from the big technology companies based out of San Francisco. People are hoping that Lyft’s revenue will be able to grow in the future, thus signaling in strong returns for early investors behind the company’s stock market offering.
Analysts are saying that people love to put their money into big tech companies, and even though Lyft has recorded losses of nearly a $1 billion in 2018, people will still bet on Lyft’s probability for profits in the future with their stock investment.
Lyft offloaded 32.5 million shares on to the market and priced each share at $72. The company managed to raise $2.34 billion in its IPO on Friday. The stock opened at around $87.24, but later lost almost 9 percent of its value to close down on $78.29. This means that the current market capitalization of Lyft stands at $24.3 billion, meeting the company’s IPO targets by a fair margin.
Lyft’s initial public offering got oversubscribed by 20 times, as institutional investors such as mutual funds scrambled to get a hold of those red hot shares.
Many people are concerned about the ballooning market cap figures of big tech companies despite the optimism behind the IPO. Lyft failed to record any profits for the 2018 financial year despite hitting revenue figures of more than $2 billion. This means that the company has recorded net losses for 6 straight years now.
The big stock offerings from billion-dollar tech companies mean that people have to decide on whether to get behind the hype or get left behind when these companies eventually start making a profit. Currently, both Uber and Lyft are involved in a heated tussle, as they aggressively expand into new territories and capture as much market share as possible. This is why these companies are sacrificing profits in the short term for rapid growth. Once these companies stop their aggressive expansion plans and focus on growing their profits that is when both these tech giants will be able to return to profitability. To that end, Lyft is diversifying its business assets and experimenting with self-driving cars and other businesses such as electric bike sharing.