Lyft launches investor road show ahead of IPO

Lyft’s IPO is on track to be the biggest U.S. technology IPO since Snap Inc’s in 2017.

In a significant development, Lyft Inc has kicked off its investor road show ahead of its initial public offering and is chasing a valuation of up to $23 billion as it woos money managers ahead of rival Uber Technologies Inc’s own IPO in April.

The IPOs of both these ride services companies represent a watershed for Silicon Valley’s technology unicorns, which for years have snubbed the stock market in favor of raising capital privately, with investors happy to back their frothy valuations.

The market rally of the last few years, however, coupled with the desire of some of the startups’ insiders to cash out, is leading many technology firms, including Airbnb Inc, Slack Technologies Inc and Stripe Inc, to plan market debuts.

Just like many unicorns, both Uber and Lyft are losing money and are eager to tap investor anxiety about missing out on a red-hot technology IPO. Despite the hype, investors and analysts opine, both IPOs will push the companies to outline a path to profitability, as well the prospects of eventually replacing some of their drivers with self-driving vehicles.

“They need to give us some good direction on when they expect to turn the corner and get to profitability, and let us know what a sustainable sales and marketing level is,” said Kathleen Smith, founding principal at Renaissance Capital, a research firm and manager of IPO-focused exchange-traded funds.

In a regulatory filing, San Francisco-based Lyft had stated, it plans to sell a little more than 30 million class A shares, which have fewer voting rights than class B shares, at between $62 and $68 per share.

It aims to raise up to $2 billion in its IPO at a fully diluted valuation of as much as $23 billion, which includes restricted stock. The company would fetch a public market capitalization, which counts only shares listed, of just over $19 billion at the top end of the indicated price range.

Lyft’s IPO is on track to be the biggest U.S. technology IPO since Snap Inc’s in 2017; its IPO is slated be the tenth-biggest internet IPO of all time in the country, according to data provider Dealogic.

Lyft’s IPO road show in New York began on Monday and Tuesday. It is scheduled meetings in NY and Boston, later this week, will see investors meet co-founders Logan Green and John Zimmer, as well as Chief Financial Officer Brian Roberts and Catherine Buan, vice president of investor relations.

Lyft’s shares are scheduled to debut on Nasdaq on March 29 under the symbol “LYFT.”

According to sources familiar with the matter at hand, Lyft’s pitch to investors will focus on the simplicity of its business, as opposed to Uber’s expected focus on a more diversified strategy.

Following the IPO, Green, the CEO, and Zimmer, the firm’s president, will collectively have just shy of 50% of the company’s voting rights. Their stakes would be worth $569.4 million and $392.7 million respectively, if the IPO prices at the top its target range.

Incidentally, their grip on the firm’s has come under criticism, by some investors, on corporate governance.

“Lyft’s dual-class share structure leaves investors virtually powerless. This is highly risky for long-horizon investors and for the integrity of the capital markets,” opined Ken Bertsch, executive director of the Council of Institutional Investors.

Although Lyft’s marketshare in the U.S ride-sharing is nearly 40%, it has warned that further growth could come at the expense of losing more money. Lyft is already deep in the red.

In 2018, Lyft’s revenues were $2.16 billion, double that of its previous year’s and far higher than $343 million in 2016. It posted a loss of $911 million in 2018 versus $688 million in 2017.

J.P. Morgan, Credit Suisse and Jefferies are among the lead bookrunners for the listing.

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