Lyft, the second biggest ride share company, with, what they claim, is 39% of the market, is going public tomorrow, Friday 3/29/19.
What does “going public” mean?
Well, the company is doing an I.P.O. initial public offering, in which they sell stock of the company to the public for the first time.
Lyft will trade under the ticker symbol; “LYFT”
Companies I.P.O. frequent. So, will I buy Lyft tomorrow?
Companies, before they go public, issue what is called a “S-1” it is a prospectus detailing the companies financials.
IF YOU CAN’T SLEEP TONIGHT, GO AHEAD AND CLICK THIS LINK TO READ THEIR S-1. IT’S BORING
ACCOUNTING CRAP. YOU’LL BE ASLEEP SOON!
https://www.sec.gov/Archives/edgar/data/1759509/000119312519059849/d633517ds1.htm
First negative thing that stands out is LYFT is selling shares structured as “Class A” and “Class B” shares. When you own shares, you are (part) owner of the company. To make sure you stay a peon, the “Class A” shares, which they are selling, only have 1 vote. While the “Class B” shares, which management is keeping, are worth 20 votes each. That’s bad. LYFT is telling you;
“we want your money, we just don’t want your opinion”
Let’s get into the earnings. After all, if you buy into a company, you are doing so because the company makes money, OR HAS THE POTENTIAL TO MAKE MONEY!
How much has LYFT made the past few years. The S-1 tells us.
REVENUE INCOME
2014- $343,298 (682,794)
2015- $1,059,881 (688,301)
2016- $2,156,616 (911,335)
*figures are in milions, so add “,000” to get full number
See those parenthesis? Those are bad.
Like when you get your utility bill and the front envelope lettering is in ALL RED, with the letters; “Urgent. Do not mail” Am I the only one that has gotten one of those in my earlier years?
Those parentheses represent losses. Yup. Losses. Like, the company lost that much money that year.
Notice the loss has increased from 682 million(2014) to 911 million(2016).
Dam competition! Lets call him Uber
So why is the company going public. When a company goes public, it can do so for many reasons including;
1. Previous investors want to cash out and see a return.
2. Employees, who were promised stock in lieu of paychecks, want to make money
3. The company is selling stock(ownership) to fund growth opportunities.*
4. The company is selling stock(ownership) to fund current operations. (BAD)
*This is common in retail, casinos, automotive, anything that needs a ton of capital to build out the business.
Lyft mentions what they are going to do with the proceeds;
“In an earlier regulatory filing before the IPO pricing, Lyft estimated it would raise $2.1 billion if the offering price is $71 per share. The company plans to use the offering proceeds for working capital, operating expenses, capital expenditure, future acquisition or investments in new products, services or technologies”
Sooooo…..looks like they are going public for the reason number 4. No bueno! Maybe a little bit of number 3. Maybe a little bit of number 2. Maybe a little bit of number 1. Who knows the real reason they are going public, but we do know, via the S-1, they need money to continue the discounting/subsidizing of rides they are doing.
SPOILER ALERT! I have never driven in a “LYFT”. I have always/only used UBER. I get Uber credits from American Express monthly. I get a ton of Uber promo codes. I have no reason to use LYFT, UNTIL, Uber stops sending me free rides! LYFT is having the problem of trying to acquire, and KEEP(most important) customers. It’s too competitive between Uber and Lyft.
As of tonight, Thursday, 3/28/2019, Lyft is looking at an IPO price of $71 tomorrow. That would value the company around 24 billion. Will I be buying LYFT?
“NOPE”
The only way Lyft will continue to exist, is if it merges with Uber.
Think Sirius radio and XM radio, before they merged. They were unprofitable as competitors. When they merged, they had zero competition, allowing them to ease on the subsidies, and start making some money!
https://money.cnn.com/2007/02/19/news/companies/xm_sirius/index.htm
Does Lyft and Uber have subsidies? Ohhh yeah they do. Their whole business model is based on it. They have to try and take you, the customer, away from the other. Merging solves this problem.
Now, I’m not saying you won’t see the stock price of Lyft go up the first day. There is a lot of excitement over this stock. They already raised the price from $61-71. Is it a long term investment? Not on it’s own.
If you are looking to buy anyways, and don’t have a brokerage account, sign up, with my link provided, for Robinhood. It’s a FREE, online brokerage, where you can buy stocks commission FREE. If you sign up via my link, you get a FREE SHARE OF STOCK! (I get one as well) It’s a random share, but hey, it’s FREE.
