Following a hugely successful IPO that saw Lyft raise its price range to $72 from $68 and sell more stock than it originally planned as a result of high demand, the ride hailing app’s share price has suffered steep losses after a positive start to life as a public company. Yesterday saw the Lyft share price slump almost 11% to $60.12, taking its current market value to over 16% below the IPO price. Its market capitalisation is now $17.19 billion having started at around $23 billion.
And Lyft’s woes may well continue. Uber, Lyft’s much bigger ride hailing app rival, also a major player in the development of driverless vehicles technology, is today expected to publish its own IPO prospectus. Uber aims to raise around $10 billion at a valuation that could be upwards of $100 billion, dwarfing Lyft’s market capitalisation and putting the two start-ups into direct competition in capital markets as well as on smartphones.
The imminence of Uber’s move to launch its own IPO, which had been expected to take place later this month, became clear after the company informed holders of its convertible debt that it expects its shares to be priced in a range between $48 and $55. That would equate to a market capitalisation of between $90 and $100 billion. However, it is likely that the company’s IPO ambitions lie at the top end of that range. And like Lyft, if demand proves high enough the eventual pricing of the IPO could actually be higher.
A formal price range will be confirmed towards the end of this month, with Uber’s NYSE debut earmarked for May 10th. However, it is unlikely that Uber will view Lyft’s post-IPO troubles as a positive, despite the company being a direct competitor. The poor performance of Lyft’s post-IPO share price trajectory may well mean investors approach Uber’s own IPO more cautiously.
More conservative investor sentiment towards tech ‘unicorns’ is demonstrated by the fact that Pinterest has set the price range of its IPO, which will take place next week at $15-$17. That range represents a downgrade on the valuation it achieved during its last private investment round.
Uber’s IPO is unlikely to represent a similar ‘down round’, with its last private valuation taking place at $76 billion, even if an initial price range valuing it at $90 billion to $100 billion is down on the $100 billion to $120 billion mooted until recently.
Much will rely on what investors make of financial details included in the IPO prospectus to be published today.
The company has been making some financials public to investors for several years but today’s information will be expected to offer potential IPO investors more granular insight. Extensive details on financial performance, market position, revenues, expenses and legal and regulatory disputes can be expected to be included.