LYFT IPO – Gamble or Sound Long-Term Investment
The LYFT IPO finally released on Friday 29th March amongst lots of hype from avid tech investors. But are they turning Tech IPO’s into a Gamble by taking profits quickly, or is there a long-term investment opportunity here?
First some facts about LYFT and their IPO.
- LYFT made a loss of just under $911 million last Year!
- In 2018 LYFT Revenues were nearly $2.2bn from 30.7 million riders and 1.9 million drivers.
- 60% of the company is still owned by the founders Logan Green, John Zimmer and 12 other top LYFT directors and executives. So, in effect regardless of any future disquiet by public shareholders on how the company is run, they won’t be able to affect change! Believe it or not, this model has become the norm in Silicon Valley with $FB, $SNAP and others with similar majority voting rights with founders and executives.
- LYFT issued 32.5 million shares at $72 per share.
- The company’s share price opened around $87 per share, a whopping 21% above the $72 set by the Company on Thursday night before the IPO when it raised $2.34bn from investors.
- During $LYFT’s first day of trading the market witnessed a high of $96.84, a low of $75.49 and finally closed at $87.49.
- More than 70 million shares exchanged hands by the close of the Markets in its first day!
One small takeaway from the last fact, in my opinion, is that traders aren’t really serious about long term investing as, in theory, each share changed hands at least twice in the first day of trading!
These are just some of the facts surrounding $LYFT and let me pose a simple question. Please forget the sector this company is in and put your sensible, mature investing head on for this next question.
If you had company “A” that made such a LARGE loss after record revenues in any company going public, would you say to your friends and family. This looks like a great Investment?
Just think about that a minute. Your telling your friends and family to put some of their hard-earned cash into a company that loses money, money they can’t afford to lose!
Take the SNAP example – Lots of hype leading up to IPO, lots of initial activity and all these months since IPO, still 8% below its original $17 offering price! AND Morgan Stanley cutting its price target for $SNAP to $16 from previous $28!
Investors learn from previous market reactions, earnings and news cycles. So as a long-term investor I will look at some key points:
- Recent SNAP IPO experience in the markets!
- BIG loses in 2018 for LYFT, despite record revenue! Smells like business model isn’t working!
- Even if the public shareholders recognise the business model isn’t working, they can’t do anything about it! Because the Company founders, executives and Directors, that potentially are running a poor business model has the majority of voting shares!
So as a normal human being that has maturity, patience and common sense, who’s Blend portfolio has grown 16% in the first quarter this year (slightly outperforming the S&P500). I have to fall back to my base saying about IPO’s
“If in Doubt, Stay Out!”
So, for now, I will let the Tech Gamblers play with this stock see where the true value is over time and look for genuine profit taking pullbacks to trade. It may appear in our Swing Trading membership in the next year, if it performs!