> Lyft’s stock market debut has set up its founders, employees, early backers and even those who scored shares in the initial public offering Thursday night for quite a windfall.
... not really? Most of those folks are locked out for several more months and can't sell -- at which point the stock may suffer increased selling pressure, much like Snap. These folks are no more successful now than they were a week ago.
Also the IPO price was $72 -- and Lyft is selling at $69 right now, so, no, the institutions that bought the IPO are not having a windfall at present. (But now I see this article was published Friday, before today's continued decline, so I see why this made it past the fact checkers.)
I found this simple graphic a great distillation of why Lyft and Uber may be considered overvalued:
It's actually worse than that for RSU holding employees. The taxation event occurs on share release for RSUs, at a cost basis of the price on release. In many cases, that will be the day of the IPO, at the IPO price.
If the share price falls over the lockup period, employees end up owing tax at a share price higher than they are able to sell. Some of that is usually offset by the company withholding some of the released shares for taxes, but the current withholding rate is substantially under most engineers' marginal tax bracket. It amounts to a ~10% extra tax penalty on the share decline.
Here is an 60-minute interview, in 1999. The journalist/expert made the same argument as in your graphic, that a software company is overvalued because its market cap is higher than traditional companies
the interviewer literally laughed at how Amazon is overvalued, because its stock price was worth 20% MORE than a real company like Sears. Your graphic uses the same logic as that interviewer did in 1999.
I’d be curious how much stock the IPO institutions sold after the opened. Do they tend to hold on to most of their stock for a long time? It could be that a bunch of people who were unable to participate in the IPO but bought the stock when it became listed on the market and popped were the main losers.
Also, that graphic doesn’t make Uber and Lyft seem all that overvalued - does it really seem unusual for Lyft to do as well financially as Delta?
In all likelihood, many of the funds preallocated shares have already sold. People don’t subscribe to IPOs for a buy and hold strategy, they subscribe for easy risk-free profit.
The stock price drop isn’t exactly surprising. There are heavy losses from last year, another year of tremendous losses this year, and while growth is highly valued there is a difference between losing 5%, 50%, or 90% of revenue in a calendar year.
Snap was certainly overvalued at IPO, again heavy losses and very large revenue growth projections. Each quarter that they missed in their MAU growth and/or revenue growth the stock got hammered. It hit a low and now is rebounding to more sensible levels. If they can get their spending more under control and continue their positive revenue growth they will mature into a solid public company.
The other challenge for Lyft is that it’s hard to find a comparable. For Snap you have twitter and Facebook so you can estimate the costs it takes to run the operation as well as the potential revenue on a per user basis from two publicly traded companies that have both been in the market for a while.
With Lyft what stock would you use as a comparable to better understand their cost structure at scale as well as the proper way to value their customers true LTV?
The stock is still trading well above the last private round. I would consider it entering into true bear territory if it starts trading below the last private valuation. Which is what happened to Snap.
Then that shows you that valuing a stock on future growth especially at the later stages can be quite dangerous as any misstep is magnified.
This is also challenging news for Uber really. Because it has a similar story. Great revenue growth but heavy losses. If anything coming out first was great, they get all of the press and attention. The IPO was a great success internally because they capitalized the company well and given the pop and the receding stock price they didn’t leave any money on the table.
Now that they are public it’s going to be about the long game. Given the heavy drop in price, you would expect this to continue for the next several quarters until after the lock up period when more shares will hit the market. They need to keep hitting their numbers with no negative surprises as well. It’s not crazy to see them get adjusted down 30-50% and have the stock settle into a floor before the fundamentals of the business really take over in terms of valuation.
Well, it's called an exit for a reason. Essentially, a team of professional financial analysis that have models and experience pricing the stocks, and a knowledgeable PR team, decide the best time and the price to dump the stock onto the market in order to maximize the returns the existing equity holders will get. As a retail investor, you're practically betting against the house here.
you are right and I'm not sure why you are being downvoted.
Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day to make a quick profit.
The individual investors and employees that are still in LockOut are now holding the falling knife
JPMorgan priced this like a bag of numpties. They had a range in 62 to 68, but caved to pressure and jacked the price. Early investors are fine--if they had sense, they sold some before the IPO. Same with employees. But retail got screwed, and that's a shame for Lyft's long-term prospects amongst those investors, as well as for upcoming B2C IPOs, e.g. Uber, Airbnb and Pinterest.
I don’t understand this expectation that retail investors should get a decent profit on a stock they bought days ago. It was priced at 72, went up a bunch, and is now down less than 5% from what they offered it at. It all seems... fine?
Didn't lyft itself say they have no idea if they can get to profitability? Wouldn't it make more sense to short lyft than invest in them? Ridesharing companies have been burning through investor money, and having a VERY hard time showing any real profits on the books, and with self-driving cars, the manufacturers will become their own rideshare, and likely change the model of car ownership to one of cars on demand.
> with self-driving cars, the manufacturers will become their own rideshare, and likely change the model of car ownership to one of cars on demand
You're assuming that manufacturers would do this instead of selling (or even leasing) the cars to companies like Lyft and Uber directly. I don't think this is a sound assumption. Most industries separate operations from manufacturing--shipyards and shipping companies are separate companies; aircraft manufacturing and airlines are separate companies; locomotive manufacturers and railroads are separate companies. If Lyft can barely break even long enough to survive to the invention of self-driving cars, they will be the ones providing cars on demand because that's what they already do.
> Wouldn't it make more sense to short lyft than invest in them?
Lyft beat Uber to IPO and raised a bunch of money. If Lyft's stock tanks, Uber will get an extremely depressed IPO and raise far less money while having a far higher burn rate. This could possibly cause Uber to collapse before Lyft and leave Lyft as the remaining big player in the space.
In short, the market is likely to remain irrational longer than you can remain solvent.
At this point, every single person who bought Lyft in the last two days is underwater. The only ones who are still above water are the pre-IPO investors and I wonder what their lock-up agreements are. In no way can this be called a success for anyone, it's a terrible IPO.
Many companies have been railroaded by the banks to price their IPO shares so conservatively that they make relatively little money on the IPO. It may be dwarfed by the amount the banks and investors make in a few days.
Taking the long term view, maybe this IPO is just fine. The company gets funds, they grow their business and the stock will rise well over time.
Every previous tech IPO in the past few years has had a curve like this. Facebook dropped below $20 shortly after IPOing, before starting its long ascent to >$100. Short-term speculators are likely to be burned, but if Lyft does meet expectations in the next few years, long holders will make out well.
majority of the investment industry is about pump and dump during next round. as per usual, the unsuspecting
retail investors driven by 'advisors' end up holding
the bag. what else is new?
[+] [-] nostromo|7 years ago|reply
... not really? Most of those folks are locked out for several more months and can't sell -- at which point the stock may suffer increased selling pressure, much like Snap. These folks are no more successful now than they were a week ago.
Also the IPO price was $72 -- and Lyft is selling at $69 right now, so, no, the institutions that bought the IPO are not having a windfall at present. (But now I see this article was published Friday, before today's continued decline, so I see why this made it past the fact checkers.)
I found this simple graphic a great distillation of why Lyft and Uber may be considered overvalued:
https://i.imgur.com/z1aCZaX.png
[+] [-] yojo|7 years ago|reply
If the share price falls over the lockup period, employees end up owing tax at a share price higher than they are able to sell. Some of that is usually offset by the company withholding some of the released shares for taxes, but the current withholding rate is substantially under most engineers' marginal tax bracket. It amounts to a ~10% extra tax penalty on the share decline.
[+] [-] confiscate|7 years ago|reply
Here is an 60-minute interview, in 1999. The journalist/expert made the same argument as in your graphic, that a software company is overvalued because its market cap is higher than traditional companies
https://youtu.be/VuI-ss5aQU8?t=629
the interviewer literally laughed at how Amazon is overvalued, because its stock price was worth 20% MORE than a real company like Sears. Your graphic uses the same logic as that interviewer did in 1999.
[+] [-] ummonk|7 years ago|reply
Also, that graphic doesn’t make Uber and Lyft seem all that overvalued - does it really seem unusual for Lyft to do as well financially as Delta?
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] alexpetralia|7 years ago|reply
This of course depends on when they sell, or sold!
[+] [-] andrewtbham|7 years ago|reply
[+] [-] mruts|7 years ago|reply
[+] [-] raiyu|7 years ago|reply
Snap was certainly overvalued at IPO, again heavy losses and very large revenue growth projections. Each quarter that they missed in their MAU growth and/or revenue growth the stock got hammered. It hit a low and now is rebounding to more sensible levels. If they can get their spending more under control and continue their positive revenue growth they will mature into a solid public company.
The other challenge for Lyft is that it’s hard to find a comparable. For Snap you have twitter and Facebook so you can estimate the costs it takes to run the operation as well as the potential revenue on a per user basis from two publicly traded companies that have both been in the market for a while.
With Lyft what stock would you use as a comparable to better understand their cost structure at scale as well as the proper way to value their customers true LTV?
The stock is still trading well above the last private round. I would consider it entering into true bear territory if it starts trading below the last private valuation. Which is what happened to Snap.
Then that shows you that valuing a stock on future growth especially at the later stages can be quite dangerous as any misstep is magnified.
This is also challenging news for Uber really. Because it has a similar story. Great revenue growth but heavy losses. If anything coming out first was great, they get all of the press and attention. The IPO was a great success internally because they capitalized the company well and given the pop and the receding stock price they didn’t leave any money on the table.
Now that they are public it’s going to be about the long game. Given the heavy drop in price, you would expect this to continue for the next several quarters until after the lock up period when more shares will hit the market. They need to keep hitting their numbers with no negative surprises as well. It’s not crazy to see them get adjusted down 30-50% and have the stock settle into a floor before the fundamentals of the business really take over in terms of valuation.
[+] [-] john_moscow|7 years ago|reply
[+] [-] askafriend|7 years ago|reply
[+] [-] monitorman|7 years ago|reply
[+] [-] harryh|7 years ago|reply
[+] [-] warp_factor|7 years ago|reply
Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day to make a quick profit. The individual investors and employees that are still in LockOut are now holding the falling knife
[+] [-] Havoc|7 years ago|reply
[+] [-] shhehebehdh|7 years ago|reply
Speculators take on a lot of the risk, whether they be small or large.
[+] [-] Animats|7 years ago|reply
[1] https://www.nytimes.com/2019/04/01/technology/lyft-stock.htm...
[+] [-] JumpCrisscross|7 years ago|reply
[+] [-] freewilly1040|7 years ago|reply
[+] [-] forkLding|7 years ago|reply
[+] [-] rb808|7 years ago|reply
[+] [-] gremlinsinc|7 years ago|reply
[+] [-] philwelch|7 years ago|reply
You're assuming that manufacturers would do this instead of selling (or even leasing) the cars to companies like Lyft and Uber directly. I don't think this is a sound assumption. Most industries separate operations from manufacturing--shipyards and shipping companies are separate companies; aircraft manufacturing and airlines are separate companies; locomotive manufacturers and railroads are separate companies. If Lyft can barely break even long enough to survive to the invention of self-driving cars, they will be the ones providing cars on demand because that's what they already do.
[+] [-] stefan_|7 years ago|reply
You could short Lyft, but do you have enough money to wait out the people that just saw them raise 20 billion?
[+] [-] bsder|7 years ago|reply
Lyft beat Uber to IPO and raised a bunch of money. If Lyft's stock tanks, Uber will get an extremely depressed IPO and raise far less money while having a far higher burn rate. This could possibly cause Uber to collapse before Lyft and leave Lyft as the remaining big player in the space.
In short, the market is likely to remain irrational longer than you can remain solvent.
[+] [-] docker_up|7 years ago|reply
[+] [-] m463|7 years ago|reply
Many companies have been railroaded by the banks to price their IPO shares so conservatively that they make relatively little money on the IPO. It may be dwarfed by the amount the banks and investors make in a few days.
Taking the long term view, maybe this IPO is just fine. The company gets funds, they grow their business and the stock will rise well over time.
[+] [-] deminature|7 years ago|reply
[+] [-] johnrob|7 years ago|reply
[+] [-] idlewords|7 years ago|reply
[+] [-] dawhizkid|7 years ago|reply
[+] [-] YeahSureWhyNot|7 years ago|reply
[+] [-] jjeaff|7 years ago|reply