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Lyft shares decrease in light of Uber’s looming IPO

Uber has announced its initial public offering (IPO) to be released on Thursday and will make its market debut in May.

 

The rivalry between the two ride-hailing apps, Uber and Lyft, has reached a new level. Uber is ready to publish paperwork for its IPO that could potentially make the organization become worth $100 billion. Due to this, Lyft’s share prices have reached a new low as they have dropped by 11 per cent.

Lyft’s shares closed at $60.12 on Wednesday- around 16 per cent lower than its IPO price from March 28 which was valued at $72.

Uber is expected to announce its IPO on Thursday and it has said that it expects to raise $10 billion which would make it the largest stock offering of the year.

It is expected that if this were the case, valuation could be approximately $100 billion, the Wall Street Journal reported.

Matt Kennedy of the IPO research firm Renaissance Capital stated, “Even a valuation in the $90 billion range would represent a healthy premium to the latest private valuation (some $76 billion) in August 2018.”

He added, “Uber will definitely be pegged to Lyft. So they can’t be too aggressive on valuation, given where Lyft is trading. Though, it’s possible that some of the pressure on Lyft is related to investors looking to pick up Uber instead.”

Analysts have warned that both companies –Uber and Lyft- would need strong growth to justify these ambitious valuation figures.

Both firms have disrupted traditional taxi services and have been actively investing in other transport options for the future such as electric bikes and scooters and even autonomous vehicles.

Lyft’s shares have decreased significantly over the past few days and this has created an atmosphere of caution for other tech “unicorns” announcing their IPOs as they, in the past, have attracted a great deal of private investment for years and have avoided tapping into the public market.

After going public, Lyft attracted some interest from potential investors for the first couple of days however its shares fell significantly.

Uber however, has set its price tag to $100 billion which is in fact, lower than some forecasts. In the last private fundraising round, the company was valued at $76 billion.

The IPO paper which is to be published on Thursday will provide details about its financial performance, competitive position and disclosure of its history of legal battles.

Uber has declined to comment on the IPO and so have its lead underwriters Morgan Stanley and Goldman Sachs.

 

However, Uber’s Chief Executive Officer Dara Khosroshahi, has promised greater transparency in order to restore trust and confidence in the firm which was hit by a wave of legal scandals and misconduct over the past couple of years.