Lyft Drops Below I.P.O. Price in Second Day of Trading - New York Times

SAN FRANCISCO — Lyft’s debut on the stock market is off to a bumpy start.

The ride-hailing company went public in a blaze of glory on Friday, as its stock jumped 8.7 percent from its initial public offering price of $72 a share. But on Monday, its second day of trading, Lyft’s stock plunged more than 10 percent to below $72. It was trading at $68.94 as of 3:16 p.m. Eastern time.

The rapid decline raises questions about investors’ appetite for fast-growing but unprofitable tech companies. While Lyft has been expanding and gaining new revenue, it lost nearly $1 billion last year. Ride-hailing companies often subsidize the cost of rides and pay incentives to drivers, which is expensive. And Lyft is also spending heavily on initiatives including electric bikes and self-driving technology.

Other tech companies that went public while recording heavy losses, such as Snap, Twitter and Groupon, also eventually fell below their offering prices.

“Everyone is taken up with the idea of the ride-hailing business; it’s exciting and high-growth,” said Kathleen Smith, a principal at Renaissance Capital, which manages an I.P.O.-focused exchange-traded fund that will include Lyft later this week. “But it’s hard to figure out their valuation.”

Lyft declined to comment.

Lyft’s performance could sway other high-profile tech companies that are planning to go public.

Uber, the world’s biggest ride-hailing company, is planning to go public in the next few months; it is also deeply unprofitable. Others are also stampeding toward the public market, including: Pinterest, the digital pin board; Slack, the messaging company; and Peloton, the home-fitness company.

“The ones following in the wake of Lyft will be priced more reasonably,” Ms. Smith said.

Even if Lyft eventually makes money, its margins might be low, she cautioned. Lyft is constantly dealing with new competitors, which means that it may have to continue subsidizing its drivers and cutting the prices that it charges passengers. That makes profits a faraway prospect.

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https://www.nytimes.com/2019/04/01/technology/lyft-stock.html

2019-04-01 19:25:51Z
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