Lyft IPO Surges 21% Higher. More to Come?

Did you know there is a stampede of billion-dollar Silicon Valley companies lining up to go public this year? This could be the opportunity to invest in high-growth companies like Facebook, or Netflix, at the very beginning! Let's look at the Lyft IPO in more detail and whether or not it should be on your watchlist.

In its long-awaited IPO, the number two US ride-hailing giant and Uber competitor Lyft, kicked off its initial public offering on March 29, by offering 32.5 million shares to market at $72 per share.

It was extremely successful and opened its first day on the Nasdaq Stock Exchange at $87.24 - a whopping 21% above its IPO price! By the end of the day, the stock finished 8.7% higher from its listing price, closing at $78.29 - giving the company a market value of around $22.4 billion.

The surge higher was partly due to the share offering being oversubscribed. But while some investors are keen on investing in Lyft, let's look into the company in more detail and see what the future may hold for this billion dollar company.

Who is Lyft?

Lyft is a ride-hailing company which launched in 2012. While it may not be as well known as its competitor Uber, it is the United States' second-largest ride-hailing company. Here are some key essentials to know about the company:

1. Lyft's market share in the U.S. is around 29%
2. Lyft only operates in the US and Canada at this time
3. Lyft completes around 1 million trips per day
4. In 2018, they completed 103% more trips than the year before
5. Lyft increased their gross bookings by 76% from 2017 to 2018 to $8.1 billion

Some investors are certainly pleased with these statistics. In fact, some were so pleased the share price surged 21% above its listing price. Admiral Markets offers the chance to trade Lyft stock, so you can take advantage of this once-in-a-lifetime opportunity.

Should You Invest In The Lyft IPO?

While Lyft's growth numbers look impressive, they are still a very young technology startup. The risk with investing in these young companies is the fact that many of them take years to turn a profit, and may continually show large fluctuations in its share price. For example, Tesla's share price has risen wildly, a near 2,000% higher since its IPO in 2010 - yet it still does not make a profit.

Technology companies are known to aggressively reinvest every cent into growing the company. This is why even after Lyft lost $688 million in 2017 and burned through another $911 million in 2018, institutional investors (the investors of a company before it goes public), valued the company at $15.1 billion in its last funding round before its IPO.

Tech companies are often valued on the possibility of future growth, which is why a tech company's stock price can rise even though it shows no profit. Of course, not all companies see a rising stock price from their IPOs, so doing your own due diligence and understanding the risks of investing are important.

Will The Lyft IPO Help Grow The Company?

One of the main reasons a company offers its shares to the public is to raise capital in order to grow. Through the Lyft IPO on March 29, the company raised $2.34 billion. Investors will be looking for a return on their capital. If future earnings look promising, more investors will join in to help lift the share price. If future earnings do not look good, some investors will jump ship looking for the next best opportunity.

So what does Lyft have in store for the future?

Firstly, the company is betting big on autonomous rides. In 2018, Lyft launched its Aptiv fleet, a self-driving service, in Las Vegas. So far they've made over 30,000 trips. Secondly, Lyft is branching out into all forms of urban transport and mobility. In 2018, they bought out the biggest bike-sharing company in the US. However, investors will be keen to see how they can take the fight to Uber.

Conclusion

Lyft's IPO is the first of 2019, and could mark the beginning of a historic year for tech IPOs. Many investors are using the Lyft IPO to test their theories and strategies for Uber's $120 billion IPO in April. How are you preparing to trade?

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