Uber v. Lyft’s Quest for Investors: No Sharing on this Ride
After their founding in 2007 and 2008, respectively, rideshare market leaders Lyft, Inc. and Uber Technologies, Inc. have both decided to go public in 2019 (Lyft, Bloomberg; Uber, Bloomberg). With Lyft filing their S-1 on March 1stand Uber as recently as April 11th, the race for investors is hastily underway (Lyft S-1, Uber S-1).
While Initial Public Offerings (“IPOs”) are one of many ways for companies to sell to investors, they allow for sales of stock to a much broader audience and mark the first time that company shares can be listed on an exchange. Of interest to potential investors is undoubtedly the company’s S-1 and the accompanying prospectus, in addition to material information and disclosures on the health of the company (SEC Pub. No. 133). Following registration, the SEC reviews registration statements to assure clear disclosure and compliance with SEC rules (SEC Pub. No. 133). Only upon review, and subject to revision, may the SEC deem the registration statement “effective” (SEC Pub. No. 133). Once completed, companies may list their shares on a stock exchange. Uber will be listed on the New York Stock Exchange (“NYSE”), while Lyft will trade on the Nasdaq (Newcomer, Fortune). IPOs are in no way a new concept – the first version of an IPO dates back to 1602 when the Dutch East India Company began selling subscriptions of its capital stock (Petram, UvA). The Bank of North America began the first IPO in American history in 1781 (Guzzetta, Inc.). Uber is likely on its way to joining the history books, with its IPO projected to be in the top 5 largest IPO listings in the history of the NYSE (Newcomer, Fortune).
While Uber and Lyft already compete within the minds of many consumers, the proximity in timing of the two companiesgoing public now extends to a competition of attracting investors. Uber has undoubtedly felt the pressure of Lyft’s presence. Uber’s revenue slowed last year as it struggled to maintain its market share, while Lyft steadily increased its market share to 30% (Bullock, Financial Times; Bond, Financial Times). Uber brought in $11.3 billion in revenue last year, with $1.46 billion coming from its subsidiary Uber Eats alone. While it had a negative cash flow of $2.1 billion in 2018, it is still a decrease from the $4.5 billion loss sustained in 2016 (Bullock, Financial Times). By comparison, Lyft’s revenue was $2.1 billion last year, with a net loss of $911 million (Bond, Financial Times).
While Uber is still awaiting its notice of effectiveness from the SEC, it is expected to begin its investor roadshow on April 29thand its shares are projected to be listed on May 10thon the NYSE (Bullock, Financial Times). Lyft began its investor roadshow the week of March 19th, with its IPO being declared effective on Thursday, March 28th. Lyft shares opened at $87.24 per share when it began trading on the Nasdaq (Rooney, CNBC; Lyft S-1; Bond, Financial Times). On Thursday (March 28, 2019) alone, Lyft sold 32.5 million shares ($72/share), with its IPO raising $2.3 billion in total (Salinas, CNBC). This places Lyft’s present value at $24 billion (Bond, Financial Times). Though shares closed almost 9% above the IPO price on March 29th, Lyft’s shares dropped 11% the following week amid news of Uber’s imminent IPO filing (Bond, Financial Times; Dey, Bloomberg). Uber is expected to raise $10 billion through its IPO, such that it can be valued between $90-100 billion (Bullock,Financial Times). Both Uber and Lyft will implement programs that offer shares to drivers, with Uber offering the opportunity to buy shares at the initial IPO price to drivers who have made at least 2,500 Uber drives (Bullock, Financial Times).
Uber’s bombastic numbers cover up its relatively slow growth rates. While Lyft grew at 94% year-over-year in the fourth quarter of 2018, Uber grew at 22% for the same time frame (Windsor, Financial Times). The breadth and size of both companies remains different, with Uber operating on a significantly larger magnitude. Lyft operates solely in North America and recently acquired Motivate, a bike sharing service (Lyft; Egan, CNN). Uber is available overseas – with coverage spanning across North and South America, the E.U., Asia, Africa, and Australia - and has expanded its services to a variety of different platforms such as Uber Eats, Uber Freight, and JUMP Electric Scooters (Uber; Egan, CNN).
The actual effects of Uber and Lyft competing for investors remain to be seen; however, the future implications of these IPOs are significant. 2018 was the biggest year for IPOs since 2014, with 188 IPOs raising more than $45 billion (Chafkin,Inc.). While the U.S. may have entered a new “boom-bust cycle,” U.S. venture capitalists seem unphased and invested a record high of approximately $130 billion in 2018 (Sherman, Forbes). 2019 has started off strong with Lyft and Uber going public, and with Airbnb, Slack, Postmates, and Pinterest among the long list of other companies expected to follow suit, this could lead to another record-setting year for IPOs (Sherman, Forbes).