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What can Lyft teach us about tech IPOs in 2019?

03/04/2019

IPOs Technology US

Lyft executives at the stock market IPO
Lyft arrived on Nasdaq to much fanfare on the last Friday of March, before investor realism sent the share price crashing down. The ride-hailing company lost almost $1bn in 2018 and looks unlikely to turn a profit any time soon – long-term investors are, understandably, not impressed. But Lyft is not the only tech ‘unicorn’ planning an IPO in 2019: its close rival Uber; travel company, Airbnb; and social media group, Pinterest are among many others which are expected to go public later this year. So now that Lyft has given us a preview, what can investors expect from a big year of IPOs?

Annual net losses of almost $1bn (£0.76bn) mean Lyft (US: LYFT) lost more money in the 12-months preceding its initial public offering (IPO) than any US start-up, ever. A dubious title for the ride-hailing company, which has been providing cheap taxi services in North America for seven years and never turned a profit.

The company’s $911m net loss means each ride cost Lyft an average of $1.47 in 2018 – a rather depressing statistic that shows no sign of improving in the near term. Lyft spent $804m on sales and marketing last year and invested $300m in research and development, more than double the same figure in 2017. According to management, the company “may not be able to achieve or maintain profitability in the future”.

Hardly a glowing outlook, which may be one of the reasons investors scarpered from the stock on its second day of trading, cashing in the gains from the initial ‘IPO pop’. Lyft shares rose 11% above their…

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