The stock of ridesharing company Lyft (NASDAQ:LYFT) soared on its first day of trading. The company made its public debut on the Nasdaq stock market, and shares quickly jumped more than 20% from their offering price. However, shares closed the trading day up 8.7% at $78.29
Excitement has been building in advance of Lyft’s debut. The company filed for its initial public offering (IPO) earlier this month and beat rival Uber to the public markets, as its much larger competitor is expected to make its debut sometime in April.
For now, at least, the public stage is Lyft’s.
Strong demand for the shares
The company originally intended to price its stock in a range of $62 to $68 per share, which would have raised about $2 billion, thus valuing the company at between $21 billion and $23 billion. Yesterday, Lyft filed a revised S-1, raising the price to a range of $70 to $72 per share.
Late Thursday the company priced its offering at the top end of the range, which would raise about $2.5 billion and value Lyft at more than $24 billion. Apparently, even the higher share price wasn’t enough to dampen investor demand for the newly minted stock. It also makes Lyft one of the most valuable U.S. companies to go public over the past 10 years. But Uber, with a valuation expected to be as high as $120 billion, could soon outdo Lyft. The company is expected to IPO in the coming weeks.
Show me the money
In its regulatory filings, Lyft reported revenue of $2.2 billion in 2018, up more than 107% year over year. This drove (pun intended) total bookings — the total amount riders paid — to more than $8.1 billion. The company also revealed mounting losses, to $911 million last year, an increase of more than 32% compared to the $688 million Lyft lost in 2017.
Operational metrics provided further insight into how Lyft might grow from here. The company accumulated 30 million rides last year from nearly 2 million independent drivers. Active riders — which Lyft defines as anyone who has taken at least one ride during the quarter — grew to 18.6 million in the final quarter of 2018, up 48% year over year. Revenue per active rider — which is calculated by dividing total revenue by the number of active riders — increased to $36.04, up 32% compared to the year-ago quarter. The total number of rides last quarter also grew, climbing to 178.4 million.
Some unexpected winners
Some of Lyft’s drivers are likely celebrating today. The company announced in its IPO filing that it would permit a number of its most dedicated drivers to participate in its IPO, allowing them to buy shares at the final IPO price. This benefit was limited to drivers who had accumulated at least 10,000 rides by the Feb. 25 deadline.
That ability to buy shares would be meaningless without money to pay for them, so Lyft also planned to reward its top drivers with one-time bonuses of up to $10,000. They would then have the option to keep the cash or invest in the company. Drivers with more than 20,000 rides were eligible for $10,000 cash, and those with 10,000 rides would receive $1,000, as would drivers who have served on Lyft’s Driver Advisory Council.
As part of its IPO today, Lyft announced that it was committing a minimum of $50 million per year, or 1% of profits (whichever is greater), to three initiatives designed to improve city life: transportation for those in need, developing a transportation infrastructure in underserved areas, and creating a clean-energy future.
There’s plenty of debate about whether it’s wise for investors to buy shares on Lyft’s first day of trading. Even legendary investor and Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) CEO Warren Buffett weighed in on the discussion, urging investors to exercise caution, saying in an interview, “I think buying new offerings during hot periods in the market … I don’t think it’s anything the average person should think about at all.”
While there’s certainly excitement around Lyft’s IPO, the ultimate test will be the company’s financial performance in the months and years to come. With nearly $1 billion in losses last year and because of its battle with Uber for market share, it could be a long time before the company is profitable. The best investors can hope for from Lyft at this point is steady financial improvement.
Buffett might be on to something.