Tune in at 2PM ET today as Robert will be on Fox Business to discuss the LYFT IPO.
Robert’s Initial Thoughts on LYFT
Lyft has been one amazing investment-For Private Equity that is. Look no further than Sand Hill Rd. tech monster, Andreessen Horowitz. The $60 million investment they made in 2013 could pay off at about 1.6 billion tomorrow.
At a price of $70-$80 I belive there is still some money left on the table for new investors, but the easy money has been made. The trouble with IPOs today vs the 1990’s, is that private market is so big today that when these companies come to market, it is just to dump shares to the public providing a big payday for PE investors.
This is a disruptive industry and LYFT is a formidable competitor that I expect to succeed. At these valuations though, there are absolutely some risks.
One big concern is the company is losing nearly $1 billion per year and is not yet profitable. Looking out, drivers becoming employees and in the same vein driverless cars are risks. Both create increased expense, labilities and decreased margins, which will push out profits. This will be a big structural change in the economics of the company. Also, unlike Uber, this is a domestic focused business. Will their hesitancy to invest overseas ultimately stall the growth story which will be necessary to carry the stock?
I like the company and the story, but ideally, we would see a Facebook type of splash and crash where investors may be able to buy below IPO price. Based on the hype and being first to market, I don’t expect that to happen though. For most investors, sitting on their hands may be the best course of action if it trades above the IPO price.