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Ride-hailing company Lyft rises in Wall Street premiere
NEW YORK, March 30, 2019 (BSS/AFP) – Lyft shares raced out of the starting
gate but then throttled back slightly in a strong stock market debut Friday,
raising $2.3 billion in an IPO that marks a turning point for the ride-
hailing business and the so-called “sharing economy.”
The six-year old San Francisco-based company, trading on Nasdaq under the
ticker “LYFT,” opened at $87.24, up 21 percent from its initial offering
price before retreating somewhat. Shares closed the official trading day at
$78.29, up 8.7 percent.
Lyft was first off the line with its stock offering ahead of an expected
IPO later this year from its much larger rival Uber. Other hotly-anticipated
tech IPOs are expected this year from business collaboration firm Slack and
visual discovery engine Pinterest.
Uber and Lyft are among the most prominent firms in the sharing economy,
which also includes home-sharing platform Airbnb, and highlight a trend away
from ownership to services.
Both companies have driven the smartphone economy to spectacular growth to
the detriment of the taxi industry, while also raising questions for
automakers about car sales.
“Ridesharing has transformed our lives, making it easier and cheaper to
get where we need to go, and it’s pioneering an undeniable trend toward
transportation as a service,” Gene Munster and Will Thompson of the
investment firm Loup Ventures said in a research note this week.
These firms, which also are stepping up moves to autonomous rides, have
been expanding aggressively — with Lyft gaining market share in the United
States and Uber in dozens of international markets.
Uber accounted for 67.3 percent of US rideshare spending in February,
while Lyft claimed 30.3 percent of the market in a five percent increase from
the same month last year, according to consumer behavior analytics firm
Second Measure.
The rivals are also vying to become broader transportation platforms that
connect consumers to e-scooters, electric bikes and local transit systems.
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– Big losses –
But Lyft lost $911 million on $2.2 billion in 2018 revenues. Documents
show revenues grew sharply from just $343 million in 2016, but losses widened
as well.
“Lyft will have to sustain strong double-digit revenue growth for a
several years before coming close to break even,” Briefing.com said in a
note, adding that ride-hailing profitability could be enhanced significantly
by autonomous driving, an ambition of both of the main players.
“We are still in the very early innings in terms of this transition to the
transportation-as-a-service market,” Briefing said. “While smaller upstarts
continue to enter the space, Uber and Lyft enjoy a duopoly.”
Analyst Richard Windsor, who writes the tech blog Radio Free Mobile,
argues that Lyft may not be ready for the scrutiny it will face as a
publicly-traded firm.
“Lyft is shooting itself in the foot by going public, as I continue to
think that the company is not ready for the harsh glare of the public market
and it is giving away a big edge that it could have had over Uber,” Windsor
writes.
– Controversy –
The surge in the industry has not been without controversy.
One issue has been increased congestion: Schaller Consult estimated there
are more than 10,000 taxis and ride-hailing vehicles on the road at the
center of Manhattan each afternoon, two times the level in 2013.
“One-third of the vehicles are empty, meaning between the drop-off of one
passenger and pick-up of the next passenger, clogging the streets without any
mobility benefit to anyone,” Schaller said.
Labor practices have also drawn criticism.
Lyft and Uber have been classified as independent contractors, claiming
that most drivers prefer the flexible work arrangement, even if it offers
fewer benefits and less job security.
Lyft drivers took to the streets of San Francisco earlier this week to
protest low pay, pressuring the company as it put its finishing touches on
the IPO.
In 2017, Uber paid $20 million to settle a Federal Trade Commission suit
that alleged the company misled drivers on pay.
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