Ride sharing company Lyft (NASDAQ:LYFT) is currently courting investors as it prepares for an Initial Public Offering. It is expected that Lyft could come to market as early as this week, and reports of a large oversubscription to the offering has raised optimism about its market debut.
However the Lyft IPO could polarise the investment community. On any count it is a well-known provider of app based transport, at least in the US and Canada. Its IPO filing shows stronger growth in gross earnings, doubling from US $1.06 billion in 2017 to $2.16 billion in 2018. In 2018 Lyft drivers generated $8.1 billion in fares.
Lyft’s corporate vision aims high, and its IPO document suggests the global transport markets are about to be transformed, with private car ownership all but wiped out by 2025. Naturally Lyft sees itself as a prime force in this transformation.
However Lyft has never made a profit. In fact its losses are deepening, growing from $696 million in 2017 to $911 million in 2018. While this growth in losses is about one third of the growth in gross earnings, at least some of this decrease in relative losses is driven by a decline of drivers’ share of takings. One interpretation of these numbers is that Lyft’s ability to ever become profitable depends on the rapid development and delivery of driverless vehicles.
Trading in Lyft shares after the IPO could therefore become a battle between the believers and the cynics. Those relying on its iconic status and the march of innovation in technology will face off against those crunching the numbers and doubting the promise. While the future of Lyft’s business model remains uncertain, volatile share price swings could result from these wildly opposed groups.