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2018 IPO Prospects: Lyft may go Public Sooner than Uber

Posted on Wednesday, Oct 25th 2017

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Earlier this year, I had observed how it may be a while before we see the IPOs for ride-sharing apps like Uber and Lyft. For Uber, that prophecy appears to be holding good considering the widespread scandals surrounding the company with reference to its corporate culture and business practices. But, recent reports suggest that Lyft may instead be on a fast ride to the stock exchange.

Lyft’s Financials

Started in 2012 as Zimride, Lyft is a peer-to-peer transportation platform that is also the biggest rival for Uber. Like Uber, Lyft connects passengers who need rides with drivers who are willing to provide these rides in their personal vehicles. Earlier this October, Lyft completed its fifth anniversary. It claims that the service is now available to 95% of the US population, compared with 54% at the beginning of the year. Unlike Uber though, Lyft is yet to make an international appearance. Since inception, it has provided more than half a billion rides to the passengers in the US. Lyft is now delivering more than 1 million rides daily. It took Lyft four years to deliver the first 100 million rides, but since then it has grown at breakneck speed. Its last million rides took less than a quarter.

Like Uber, Lyft earns revenues by charging a fee on the ride fare. Lyft does not disclose the share it takes from the gross bookings, but analysts estimate that it is anywhere between 20% and 30%. According to recent reports, Lyft’s gross bookings grew nearly 25% to more than $1 billion in the second quarter this year. That would translate to revenues of $200-$300 million for the quarter. Lyft’s financials are still modest when compared with Uber’s gross bookings of $8.25 billion during the same period. Despite the high revenue growth, Lyft remains unprofitable. Analysts estimate that Lyft reported a loss of $130 million for the first quarter of the year, compared with Uber’s loss of $708 million for the same period. More recent financials for both companies are unknown.

Lyft has been venture funded so far and has raised $3.6 billion from investors including Capital G, Icahn Enterprises, Rakuten, Coatue Management, Andreessen Horowitz, Founders Fund, Mayfield Fund, FLOODGATE, K9 Ventures, and fbFund. Earlier this month, it raised $1 billion in a private equity round led by Alphabet’s Capital G. The funding valued Lyft at $10 billion. An earlier round held in April this year had valued Lyft at $7.5 billion. For comparison, Uber was last valued at $70 billion. Lyft’s latest round is expected to help the company prepare for an IPO expected to happen in 2018.

Lyft’s Self Driving Service

Lyft’s latest funding has helped it secure a partner in Alphabet. Alphabet is currently involved in a legal battle against Uber over the IP involved around Alphabet’s self-driving service Waymo. While Uber continues to battle that, Lyft has been entering into agreements with automakers and technology companies with the intention of accelerating the technology development. Automakers like Ford Motor Co, Tata Motors Ltd’s Jaguar Land Rover, and General Motors Co have signed up with Lyft to test self-driving vehicles in the network. Its most recent agreement with Ford will allow Ford to place self-driving vehicles on Lyft’s open platform. Its agreements with technology companies including Waymo, Drive.ai and nuTonomy will help them develop this technology. Integration of the autonomous vehicle technology into Lyft’s fleet will not only accelerate but also improve the evolution of the technology. Regulation issues, of course, remain to be sorted out.

Uber and Lyft are both in the pipeline to list on the stock exchange. But Uber’s new CEO Dara Khosrowshahi has a lot more on his plate. While he is focusing on taking Uber public within the next 18-36 months, he still has to deal with fixing Uber’s image and culture and fight incessant interference from its rogue founder, Travis Kalanik. Lyft does not have to deal with that sort of controversy, such management intrusion, and thus may find it simpler to list sooner than Uber. It may also, in the long run, be a more sustainable company. Uber seems to be a combustible situation.

Photo Credit: Núcleo Editorial/Flickr.com 

This segment is a part in the series : 2018 IPO Prospects

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