Head of Equity Strategy
Summary: Things aren't always as they appear at first glance. Lyft, the ride-sharing app, has updated its IPO regulatory filing but the detail this contains actually reduces the attractiveness of its upcoming launch.
The valuation is stretched
Lyft is offering 30 million shares in the price range $62-68 per share. At the mid-price the company is set to raise $1.95 billion with the intention to use around $404.8 million to fund its RSU (restricted stock units) settlement with employees as described in our earlier analysis. The number of shares post IPO will be 284,147,300 shares translating into a free float of 12.2% excluding the over-allotment option (4,615,500 shares) to the underwriters.
While Lyft is an interesting growth story in a new emerging industry (on demand ride-sharing) there are some key risks to consider. The company has made losses every year since inception and the company may not be able to achieve or maintain profitability in the future according to the S-1 filing. In addition competition is intense and costly to maintain.
The company seems to have chosen not share key metrics such as churn rates and acquisition costs on new customers but also drivers. In essence we observe less transparency than in other IPOs from US technology companies. Our worry is that the company is not disclosing this information because the story is likely not that good.