Lyft’s shares soar as investors bet on ride-hailing future

Lyft raised its target price from its initial range of $62 to $68 over the course of the last week

Lyft’s shares soar as investors bet on ride-hailing future

Lyft’s shares soared as the company went public Friday, giving investors their first chance to bet on the future of the ride-hailing industry.

The stock opened at $87.24, up 21 per cent from its offering price of $72. Lyft won the race with its much larger rival Uber to go public, and the debut marked the first time most people who have used their smartphone to summon a car through Lyft or Uber can take their chances on whether the ride-hailing phenomenon will continue to transform transportation and become a money maker.

Lyft raised its target price from its initial range of $62 to $68 over the course of the last week as investors clamoured to get in on the action, despite the company’s history of losses.

In a sign of how ride-hailing giant Lyft has changed the way we think of transportation, Lyft executives celebrated the company’s stock market debut from the inside of a former car dealership they plan to convert into a centre for their company’s drivers.

Co-founders Logan Green and John Zimmer talked about their early vision of the company and their commitment to providing alternatives to individual car ownership.

“In 2012 we launched Lyft, and pioneered the idea of on-demand peer-to-peer ride-sharing,” said Logan Green, CEO and co-founder, at an event in Los Angeles Friday. “In those early days we were told we were crazy to think people would ride in each others’ personal vehicles. And now, after more than 1 billion rides, we’re able to look forward to a world we’ve long imagined, designed less for cars and more for people.”

Lyft also said it ended up selling 32.5 million shares in the offering, above the nearly 31 million that it had targeted in its regulatory filings leading up to Thursday evening’s pricing.

“Without question, investors are looking beyond operating losses to the potential upside,” in the ride-hailing industry, said Alejandro Ortiz, an analyst for SharesPost.

READ MORE: Airports feared losing revenue to Uber and Lyft. Here’s what happened

The IPO raised more than $2 billion to use in its heated competition with Uber to woo riders. Uber is expected to make an even bigger splash when it completes its IPO later this year.

Investors embraced Lyft despite an uninterrupted history of losses totalling nearly $3 billion since its 2012 inception on the premise that its growing popularity will pay off in the long run.

“Lyft has been successful against big odds because we have always prioritized the long term sustainable growth of both our community and our company,” said John Zimmer, president and co-founder. “Business results and societal impact are not only linked, but they can and do feed off each other. We know the road ahead comes with both massive opportunities and genuine challenges.”

Lyft said Friday it will invest $50 million annually, or 1 per cent of profits — whichever is greater — in transportation initiatives in cities. The investments will include free or discounted rides for medical patients and low-income seniors and developing infrastructure for bikes, scooters and transit.

The IPO represents a watershed moment for ride hailing, an industry hatched from the rise of smartphones. Now that both Lyft and Uber have made it easy to summon a ride on a mobile app, more people are already starting to wonder if owning their own cars will make sense in the future.

Lyft has been gaining ground on Uber in the past two years, which enabled it to double its revenue last year to $2.2 billion — the kind of growth that tends to wow investors.

The company’s U.S. market share has expanded from 22 per cent in 2016 to 39 per cent last year as Uber slogged through revelations about rampant internal sexual harassment claims , allegations that it stole self-driving technology and other mortifying issues, prompting a consumer backlash.

Meanwhile, Lyft parlayed a warm and fuzzy image that it used to cultivate by adorning drivers’ cars with a fluffy pink moustache to position its brand as the more socially responsible of the two ride-hailing rivals.

Despite Lyft’s recent inroad, there is still no guarantee the company will become profitable — a risk flagged in its own regulatory filings leading up to the IPO. Developing autonomous vehicles is key to reducing driver costs, and Lyft is behind competitors such as Google spin-off Waymo, which has begun testing a ride-hailing service using its robotic minivans in the Phoenix area.

Cutting costs by reducing pay to drivers also could prove difficult, a challenge underscored by protests staged earlier this week over wages that drivers complain already are too low.

Even so, Lyft’s revenue per ride has been increasing, so some analysts see the company as headed in the right direction.

Lyft’s co-founders Logan Green and John Zimmer have structured the shares so that together they will hold 49 per cent of the voting power, enough to substantially influence major decisions.

Lyft has focused on its mission of getting people to give up their personal cars in favour of ride-hailing, shared bikes and scooters, and has remained in North America. By contrast, Uber has expanded overseas and recently bought Careem, a major rival in the Middle East, while experimenting with food delivery, boats and freight operations.

It’s become increasingly common for unprofitable tech companies to go public, and the percentage of money-losing tech companies that entered the market in 2018 rivals 2000, when the dot-com bubble burst, according to data from Jay Ritter, finance professor at the University of Florida. Some, like Amazon, which took several years to turn a profit after its IPO turned into great bets for early investors.

Cathy Bussewitz And Michael Liedtke, The Associated Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

This illustration provided by the Centers for Disease Control and Prevention in January 2020 shows the 2019 Novel Coronavirus.[CDC]
More COVID-19 exposures reported at schools in Kelowna

Interior Health added additional schools and dates to their list of exposures

Winter driving conditions returned to the Coquihalla Highway on April 10. (ICBC image)
Coquihalla motorists warned of fresh snow

Five to 10 cm of snow is expected today for the mountain highway.

Tom Smithwick has written a new book, Knocking On Freedom’s Door, about his experiences advocating for a drug addiction treatment program in Kelowna. (File photo)
‘Knocking On Freedom’s Door’: A retired Kelowna lawyer’s insights to mental illness, addiction

Freedom’s Doors advocate Tom Smithwick shares what he has learned from experiences of treatment program clients in new book

Royal LePage Arena was an addition to West Kelowna championed by Len Novakowski. (File photo)
West Kelowna community leader Novakowski dies

Former Westside regional district director Len Novakowski dies after lengthy health battle

B.C. Health Minister Adrian Dix and Premier John Horgan describe vaccine rollout at the legislature, March 29, 2021. (B.C. government)
1,262 more COVID-19 infections in B.C. Friday, 9,574 active cases

Province’s mass vaccination reaches one million people

Two-year-old Ivy McLeod, seen here on April 9, 2021 with four-year-old sister Elena and mom Vanessa, was born with limb differences. The family, including husband/dad Sean McLeod, is looking for a family puppy that also has a limb difference. (Jenna Hauck/ Chilliwack Progress)
B.C. family looking for puppy with limb difference, just like 2-year-old Ivy

Ivy McLeod born as bilateral amputee, now her family wants to find ‘companion’ puppy for her

A vehicle that was driven through the wall of a parkade at Uptown Shopping Centre and into the nearby Walmart on April 9 was removed through another hole in the wall later that night. (Photo via Saanich Police Department and Ayush Kakkar)
Vehicle launched into B.C. Walmart removed following rescue of trapped workers

Crews cut new hole in parkade wall to remove vehicle safely

Four members with Divers for Cleaner Lakes and Oceans were out at Cultus Lake on March 28 and 29 hauling trash out of the waters. (Henry Wang)
PHOTOS: Out-of-town divers remove 100s of pounds of trash from Cultus Lake

Members of Divers for Cleaner Lakes and Oceans hauled out 470 pounds of trash over two days

As of Saturday, April 10, people born in 1961 are the latest to be eligible for a COVID-19 vaccine. (Black Press files)
B.C. residents age 60+ can now register to get their COVID-19 vaccine

Vaccine registration is now open to people born in 1961 or earlier

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

A new saline gargle test, made in B.C., will soon be replacing COVID-19 nasal swab tests for kids. (PHSA screenshot)
Take-home COVID-19 tests available for some B.C. students who fall ill at school

BC Children’s Hospital plans to provide 1,200 kits to Vancouver district schools this April

Sun Peaks is tracking rising COVID-19 cases. (Kamloops This Week Photo)
Sun Peaks sees spike in COVID-19 cases at end of ski season

On April 9, there were 15 positive cases confirmed.

Ruming Jiang and his dog Chiu Chiu are doing fine following a brush with hypothermia that saw several people work together to get them out of the Fraser River near Langley’s Derby Reach Park on March 25, 2021 (Special to the Advance Times)
Man finds men who rescued him from drowning in B.C.’s Fraser River

A grateful Ruming Jiang says he will thank them again, this time in person when the pandemic ends

Most Read