Lyft’s initial public offering could end up valuing the company at about US$25 billion – more than 60% above its last private valuation – sending an encouraging signal to the stampede of Silicon Valley companies lining up to go public this year.
“It’s good news for them to see that the market has a huge appetite for IPOs,” said Reena Aggarwal, director of the Center for Financial Markets and Policy at Georgetown University.
“I think it’s a good sign all the way around, if there’s a successful IPO and others coming in the pipeline after that.”
The No 2 US ride-hailing raised about US$2.34 billion in the biggest offering by a US tech startup since Snap Inc went public two years ago, and the largest so far this year.
After a chilly start to 2019 for US IPOs as the federal government shutdown stymied activity, Lyft’s success could light a fire under a market that’s likely to welcome Uber Technologies Inc, Pinterest Inc and Slack Technologies Inc – to name a few – before the end of the year.
Upsized offering
Lyft said in a statement that it priced 32.5 million shares Thursday at US$72 each. That was at the top of the marketed range, which was increased to US$70 to US$72 on Wednesday.
The San Francisco-based company also increased the size of the offering from the 30.8 million shares it had planned to sell.
The IPO gives Lyft a value of about US$25 billion, including restricted stock and greenshoe shares that could be issued later by underwriters.
Based on the total number of shares that were to be outstanding after the offering, its market value would be about US$20.6 billion.
The offering also fulfilled a key strategic goal for Lyft: beating larger rival Uber to the market.
Uber is expected to publicly file for its offering in April, kicking off a listing that could value it at as much as US$120 billion, people familiar with its plans have said.
“We really think this is going to be the best year we’ve seen for IPOs in ages,” Jackie Kelley, Americas IPO Leader at Ernst & Young, said in an interview. “The tech IPOs are really going to get the market moving.”
Lyft first offered its shares for US$62 to US$68 each.
Orders for the IPO were oversubscribed last week, two days after the company opened its roadshow to investors, people familiar with the process said at the time.
On Wednesday, Lyft filed to increase that range.
Industry’s potential
The company’s appeal to investors was based on the potential for the ride-hailing industry’s expansion as well as its own growing revenue, which doubled to US$2.2 billion in 2018 from the previous year, according to its IPO filing.
During that time, its losses also grew, from US$688 million in 2017 to US$911 million last year.
Lyft told potential investors that it expects its expenses to decline next year, according to people who were present for one of its pitches.
Through Class B shares that carry 20 votes for each ordinary share, co-founders Logan Green, who is chief executive officer, and vice chairman John Zimmer will have about 49% of the voting rights, according to the filing.
The stock is set to start trading Friday on the Nasdaq Global Select Market under the ticker LYFT.
JP Morgan Chase & Co led the offering with Credit Suisse Group AG and Jefferies Financial Group Inc.
Altogether, more than two dozen banks were listed in the company’s filing as participating in the offering. JP Morgan will serve as the stabilisation agent, giving it a chance to earn additional fees by ensuring the first day of trading goes smoothly.
One billion rides
Lyft said in filings that its total bookings reached US$8.1 billion, with 1.9 million drivers providing more than one billion rides in the US and Canada.
That growth helped offset concerns about losses among would-be investors, who packed into Manhattan’s St Regis Hotel and the Olympic Club in San Francisco during the company’s roadshow.
Investors were seen leaving the presentations with enthusiasm and pink Lyft prospectuses.
“A roadshow being standing-room-only is a pretty good indicator that investors are interested,” said Barrett Daniels, a Deloitte partner who specialises in IPOs.
Lyft’s price bump showed there was “genuine demand and excitement,” he said.
The company didn’t give any preference when allocating shares to potential shareholders who weren’t investors in Uber, said a person familiar with the matter, who asked not to be identified because it wasn’t public.