Lyft's $25 Billion Valuation Puts Firm in Elite Company

(Bloomberg) -- With Lyft Inc. surging as much as 23 percent on its first day of trading on Friday, the market value of the ride hailing company is now in the vicinity of $25 billion - an elite league that includes Fiat Chrysler Automobiles N.V., Southwest Airlines Co., Twitter Inc. and Spotify Technology S.A.

While the trading patterns of the first few days after an initial public offering may not always be a good indicator of where the company’s valuation might settle after the initial euphoria, on an average, they seem to be fairly accurate. Over the past year, IPOs that rose in their first session are now trading 27 percent above their IPO prices on average, weighted by deal size. But new issues that dropped in their debut are now trading just 0.3 percent above their IPO prices.

Snap Inc.’s valuation hovered around $30 billion when it started trading in March 2017, and fell to around $25 billion after three months. Snap’s current market capitalization is $14.3 billion. A more drastic example is Blue Apron Holdings Inc., whose value was over $350 million during the IPO in March last year, shot to well over $600 million over the next three months, and currently sits around $190 million.

Lyft would be offering investors an opportunity to ride on its fast growing sales, which stood at $2.2 billion in 2018, up sharply from $1.1 billion in 2017. But losses mounted, too, over the same period, growing to $911 million from $688 million.

“The ridesharing industry has become one of the most transformational growth sectors of the U.S. consumer market over the past five years, with Lyft establishing itself as a clear #2 player behind the worldwide leader Uber,” Wedbush analyst Daniel Ives wrote in a note on March 27, initiating his coverage on Lyft with a neutral rating.

The enthusiastic response to Lyft’s IPO is a good omen for rival Uber Technologies Inc., which is expected to officially kick off its plans for an offering next month. DA Davidson & Co. analyst Thomas White, who has a buy rating on Lyft, said “it is hard to view the success of Lyft filing as anything but positive for Uber.”

--With assistance from Drew Singer.

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper

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