When Lyft was doing their road show there were a few analysts who had price targets of $45 as Lyfts fair value at IPO with an acknowledgement that the amount of shares available would double, and possibly triple when all shares were off restriction, meaning that the $45 price target was a best case and we would probably see far lower once people can sell.<p>This is a company that has maybe 33 million shares outstanding now with about 27 million of them being sold short. So they have an enormous short bet against them. We see borrow rates as high as 30% for borrowing shares to short with no real stable borrow available.<p>However, due to the enormous amount of those short shares being rehypothicated(relent), Lyft is vulnerable to a quick upwards price run if those long sellers ask for their shares back. That would cause a run on those shares as they may be lent out multiple times by the same bank.<p>So whenever someone ask why you don't short an individual stock its always valid to answer that you believe you are right in the long term but the short term could wipe you out if you shorted.<p>As a quick edit, uber is now indicating its opening at a range of 45.50-46.50, given that the IPO price was $45, it looks like the underwriters will have some work to do and will almost certainly exercise their green shoe option.<p>So maybe wallstreet is wising up to money losing companies or Uber learned from Lyft that a slow and steady approach to their share price would be better long term for them?
Very interesting process going on right now with Lyft & Uber both losing money and some of their drivers trying to stage protests and strikes. The drivers appear to rely on the company as their primary source of income and want more money yet at the same time the companies are operating at a loss. Were they to increase wages (as % of every ride) it stands to reason the losses would widen. If they get to wide the company goes out of business and the drivers lose their jobs. I understand that this same standard can be applied at any company but this is a gig / 'work only when you want' job so it is different.<p>The strikes were small so the effects on both companies were negligible. I would be curious to understand what changes the drivers (who work only when they want) expect and how they think a company running deep in the red could meet them. Not trying to pass judgement on the strikers just trying to understand.
Fundamentals question: Can somebody explain how these ridesharing companies expect to turn a profit, eventually?<p>If you lose 50 cents on every ride, how do you make it up in volume? Every ride is subsidized by the Sand Hill Road crowd. They're a great deal. I took a 40-min ride yesterday for US$12.50 in a high-cost-of-living traffic-clogged city. How can that make sense? A ride in a sketchy 1970s-era New York City gypsy (no-medallion) cab would have cost more. And, without all the magic and overhead of some app.<p>Oh, I get it. They're going to scale up using autonomous vehicles. But, that's also a problem. Right now their business model relies on independent owner-drivers. In other words, from the front office's point of view, their fleets fuel, maintain, garage, and insure themselves. How's that going to work when they replace the drivers' cars with their own capital equipment?<p>Why should I invest for the long term in these companies?
"...and prospects darken"<p>It doesn't actually sound like that from the body of the article.<p>I have no idea if this is true or not, but the story says most of the $1.14B loss was due to booking employee stock based compensation of $894M. I'm assuming that's come out of the IPO and is not a recurring cost.<p>With revenues of $776M, which perhaps are mostly recurring, doesn't that seem to bode well for the future?<p>Of course, I'm not sure what we can expect their actual on-going costs or revenues to be. I'm just not seeing any reason for concern in this article fter the headline.
I don't know what the end game for these companies is. Most average people would never use uber or lyft for transportation on even a semi regular basis if those companies didn't heavily subsidize the rides.
> Most of that was down to booking stock-based compensation plans for employees, who earned $894m from Lyft’s initial public offering<p>Could someone help me understand what this means? Is this compensation above and beyond employee stock options? If not, that means employees own ~5% of Lyft, which is much less than I would expect.<p>As an employee of a pre-IPO startup, I'd love to get a better handle on the realistic value of my stock if we do reach an IPO.
I don't know what the bull case for Lyft is at all. They haven't expanded into other products or markets outside of pure U.S. ridesharing, which had already been plateauing for some time. Uber, OTOH, has years of experience operating and expanding internationally, has built UberEats into it's own mult-bil vertical on it's own, and owns substantial shares of dominant ridesharing cos in other markets like Grab, DiDi, now Careem, etc.
Once the ride-sharing matures, 5-10 years from now, Uber, Lyft and new competitors are not going to take 20 to 25 percent per cent of drivers’ fare. If I had to guess, 10 years from now they take just 1-3% per ride and maybe ask few $100s upfront for each registered driver to cover fixed cost of handling new drivers.<p>These valuation include hopes for fully autonomous cars and the fear of missing out.
I previously submitted 'Uber’s enormous, vague IPO prospectus is an outrage (ft.com)'
Well worth reading and quite ominous in light of Lyft performance IMO<p><a href="https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f1c4" rel="nofollow">https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f...</a>
Is the plan for the original investors to sell their stock to regular investors before the whole thing tanks? They make their money and whoever followed is left holding the cheque. Seems like a Ponzi scheme as it's been clear for years these companies are not going to be profitable any time soon.
The problem with Lyft is that they are in a poorly understood market, in second place and burning cash at neck-breaking speed. Even if they manage to start making progress towards profitability, they might need more than that.<p>The reality is that ride-sharing probably needs another lustrum or so to solidify and that seems excessively long for Lyft in its current state.<p>Uber faces the same challenges but its way more diversified and can scale down from certain markets and verticals.
Lyft on the other hand has only one market (N.America) and only one vertical (ride-sharing).<p>Doesn't take a genius to understand that scenario looks risky as hell. Especially when you're in a business with nominal differentiation.
All these ride sharing companies are here to carry us seamlessly into the driverless future. Unless they're capable of pivoting to driverless technology they are mostly matching services for riders and drivers and Honestly, I dont think it should be uber or lyft's responsibility to build driverless technology - they should just focus on making the experience of getting a ride as excellent as possible. Leave driverless technology to other experts.
They should charge a service fee to the rider, for however much they need to be profitable; and let the drivers charge whatever they want (baseline auction). Now the customer knows how much they are paying to whom.<p>Imho, Taking a cut of earnings is borderline unethical for a automated services, whether its lyft, upwork, or patreon. Charge a fee, know your numbers, give both sides of your service's users confidence in the service's stability.
They just went public at $80b but are raising $8b, so per the chart in the article, quite a few recent investors are getting a haircut? Pre-money $72b valuation?
Uber and lyft look like a charity set up by VCs to provide people with cheaper transportation. Who knows what will happen once they increase fares as they promise to investors
It's fun watching these "smart" economists trying to tell you what's going to happen, with Lyft and with the upcoming Uber.<p>The reality is that many people will feel they're able to "beat the market", and they will try to get a chunk of the glory, mostly losing in the effort.