Lyft Inc shares raced out of the starting gate but then throttled back slightly in a strong stock market debut on Friday, raising US$2.3 billion in an initial public offering (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 US$87.24, up 21 percent from its initial offering price before retreating somewhat. Shares closed the official trading day at US$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 Technologies Inc.
Photo: AFP
Other hotly anticipated technology IPOs are expected this year from business collaboration firm Slack Technologies Inc and visual discovery engine Pinterest Inc.
Uber and Lyft are among the most prominent firms in the sharing economy, which also includes home-sharing platform Airbnb Inc, 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 vehicle sales.
These firms, which also are stepping up moves to autonomous rides, have been expanding aggressively — with Lyft gaining market share in the US and Uber in dozens of international markets.
Uber accounted for 67.3 percent of US rideshare spending last month, while Lyft claimed 30.3 percent of the market in a 5 percent increase from the same month a year earlier, 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.
However, Lyft lost US$911 million on US$2.2 billion revenues last year. Documents show revenues grew sharply from just US$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.”
However, the surge in the industry has not been without controversy.
One issue has been increased congestion: Schaller Consult estimated that 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.
The companies’ 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 US$20 million to settle a US Federal Trade Commission lawsuit that alleged the company misled drivers about pay.
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