Lyft day-two stumble shows risks of high-priced venture-backed IPOs

Lyft day-two stumble shows risks of high-priced venture-backed IPOs


Within the absence of momentum, Lyft has some challenges in constructing a long-term investor base.

First, there isn’t any apparent public market firm that may function a comparability. Uber, which is far bigger, is slated to go public quickly, however hasn’t launched its prospectus but. Thus, there isn’t any method to say the place Lyft ought to commerce relative to its gross sales and development fee.

Second, Lyft is a part of a crop of tech firms that got here of age when enterprise capital was plentiful. Like many different start-ups that launched within the final decade and noticed fast market traction, Lyft was capable of elevate a number of rounds from traders to gasoline its operations, and grew its worth into the numerous billions of alongside the way in which. Given this spectacular rise in personal valuation, it is tougher for the brand new stockholders to show a revenue.

Dropbox gives the closest analogy. It went public final 12 months at a market capitalization of about $eight.2 billion. The inventory debuted final March at $21, popped instantly and even rallied as excessive as $42 in June. Nevertheless it’s fallen since and is now again close to its IPO value.

Snap gives an much more troubling comparability. The social media firm debuted in 2017 with a valuation of $24 billion and at this time is value $15 billion.

“Many of the worth for these firms, a variety of the so-called unicorns coming to market, may have been pushed to the good thing about founders and personal traders, not public traders,” stated David Golden, who beforehand ran tech funding banking at J.P. Morgan and is now a associate at Revolution Ventures in San Francisco. “That is an enormous shift from even 10 years in the past.”

It is a story that we’ll probably hear repeatedly this year, as Uber, Pinterest, Slack and Airbnb all gear as much as go public after already capturing very giant valuations.

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