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Ride-sharing startup Lyft, set their clock ticking for its IPO likely in the next two weeks. The stock will trade as “LYFT” on Nasdaq, and the IPO range is currently set for between $62 and $68 per share
We already wrote of how Lyft launched an investor roadshow for its IPO, seeking to raise as much as $2 billion. According to people familiar with the matter, Lyft is also aiming for a market valuation of $21 billion to $23 billion (in June, Lyft was valued at $15.1 billion with a $600 million financing).
The stock will trade as “LYFT” on Nasdaq, and the IPO range is currently set for between $62 and $68 per share to sell 30,770,000 shares of Class A common stock, the company said, raising up to $2.1 billion at the higher end of that range, or $1.9 billion at the lower end. At the higher end, its valuation will be $18.5 billion, versus the projected valuation of $23 billion that we and others reported yesterday. Both would be a jump on its previous $15.1 billion valuation as of its most recent private fundraising.
Lyft also said in its updated S-1 that at the high end of the range, the maximum offering aggregate price — the maximum that it would raise at that range — will be $2,406,214,000 when considering the full range of Class A stock that will be registered, 35,385,500 shares.
In addition to the 30,770,000 shares of Class A common stock, the company said it has an additional 4,615,500 shares in options for the underwriters, adding up to the 35 million share figure. J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Jefferies LLC, UBS Securities LLC, Stifel, Nicolaus & Company, Incorporated, RBC Capital Markets, LLC and KeyBanc Capital Markets Inc. are book-running managers for the offering.
From the company they said that, upon completion of the IPO, CEO and co-founder Logan Green will have 29.31 percent share of the voting power of the outstanding stock, while John Zimmer, co-founder and president, will have 19.45 percent.
Still in Uber’s Shadow?
Both Uber and Lyft are losing money, but Uber, which promotes itself as a global logistics and transportation company, is much larger and more diverse than Lyft whose core focus remains ride-hailing. Lyft will pitch investors on the simplicity of its business while Uber is expected to play up its more diversified strategy, according to people familiar with the matter.
Lyft has nearly 40 percent of the U.S. ride-sharing market, but has warned further growth could come at the expense of more losses for a company already deep in the red.
Despite having substantial losses, Lyft has recorded rising revenue and bookings as it takes on rival Uber in the ride-hailing race. With 30.7 million users in 2018, Lyft is one of the most anticipated IPOs of the year, beating Uber to the stock market.
However, it’s important to know that tech investors are used to seeing companies lose money, sometimes for years after they go public. Investors would be mostly betting on Lyft’s prospects for future growth, especially if they are disrupting an existing business. For example Amazon, which went public in 1997, didn’t report its first profit until the end of 2001. It is now consistently profitable and among the most valuable companies in the world.
Pressure Came From the Pension Funds and Asset Managers
Just yesterday, a group of pension funds, unions and asset managers in the US, the UK and Europe urged Lyft’s board to scrap a proposed dual-class share structure, as the ride-hailing company prepares to pitch its $20bn initial public offering to investors.
The investment groups said Lyft should stick with its single class of shares with one vote each when it debuts on the Nasdaq exchange later this month, according to a letter they sent to directors last week. Failing that, they said, the company should adopt a “sunset” provision to phase out the extra voting rights within seven years. “Lyft is imposing unnecessary and uncompensated investment risk on potential shareholders both by switching to a dual-class structure and by failing to commit to one-share, one-vote by a certain date,” the letter said.
Its competitor Uber expects to go public later this year, but it has not given the same amount of detail about its sales plans. But since Uber is a much larger business, it is expected to raise far more than Lyft from its IPO.
Airbnb, Slack, Pinterest and Postmates are also all expected to go public this year. By going first with its public offering, Lyft could help to be a signal to investors about the strength of this year’s market for tech IPOs.