
Lyft prices IPO at top of range - jkw
https://techcrunch.com/2019/03/28/lyft-prices-ipo-at-top-of-range/
======
jedberg
A fun lession in dilution:

Logan Green and John Zimmer, the co-founders of Lyft, will each have about
$500M in stock at $72.

(Edit: I miscalculated the holdings of the cofounders at $85M because I didn't
account for their class B shares. However, I think my point still stands for
the most part).

Google holds $900M in Lyft stock. A16Z holds $1B in Lyft stock. GM and
Fidelity have $1.3B. Rakuten Europe has $2.2B.

$500M is certainly a life-changing outcome, but it's interesting how we value
the capital that those companies put in far more than we value the years of
work those two put in.

Edit 2: To be clear, this isn't a complaint in any way. What A16Z and Google
and the rest did for Lyft is highly valuable and worthy of compensation.

This is simply a commentary on the relative value of capital vs labor.

~~~
nostrademons
It shows how important avoiding competition by being in an overlooked industry
is, or selling quickly before it becomes a slug-it-out battle between well-
capitalized growth companies.

By contrast, the 3 GitHub founders each took home about $1.25B from their
$7.5B acquisition. Mark Zuckerburg's Facebook stake was worth about $20B in
2011, out of the roughly $85B market cap. Larry & Sergey own 11% of Google
_today_ , 15 years after it became a public company. Kevin Systrom netted
about $400M from Instagram's $1B sale. The three YouTube founders took home
around $700M of YouTube's $1.65B sale. Jan Koum and Brian Acton together took
in about $11B of WhatsApp's $19B sale, including continued stock incentives
(they may've forfeited some by departing FB early). AFAIK Markus Frind took
home nearly all of the $575M that PlentyOfFish sold for.

I was also surprised at how low the founder ownership stakes were for Box (3%
IIRC) and PayPal (Elon Musk was the largest founder shareholder at about $85M
of the $1.5B purchase price). It really does pay to keep capital requirements
low, profits high, and get on the hyper-growth curve before taking lots of
capital rather than taking lots of capital so you can get on the hyper-growth
curve.

~~~
bredren
Sure, it "really does pay" so long as you can run a company lean into
hypergrowth. Recall the number one reason startups fail is they run out of
cash.

~~~
amvalo
Isn’t that sort of like saying most humans die because their heart stops
beating?

~~~
nine_k
In a way.

But many startups run out of cash while still growing. It's more like dying
from exhaustion while running faster and faster, not a frequent outcome.

~~~
bredren
And running faster and faster or dying is your job if you are raising money
from institutional VCs in the first place.

------
warp_factor
Uber and Lyft IPOs look to me like they are legal ponzy schemes.

Both companies lose a crazy amount of money, they have close to zero moat,
customers have no loyalty and will go to another rideshare service if it is
one dollar cheaper. The fundamentals don't make any sense, but still we read
everywhere that Lyft and Uber at those prices make sense.

The VCs and founders decided to get out while the market is up (and while they
still can) and they will sell their shares to the "dumb" public that will buy
into another overhyped tech stocks without really understanding the
fundamentals. The employees cannot sell before 6 months, they are locked out.

After a couple weeks the market will probably realize this stock is overvalued
and it will start to go down, but at that point all the big fishes will be out
already and who will hold those toxic assets? individual investors and
employees that cannot yet sell.

~~~
dalbasal
Partly, it's just that everything is priced relative to the current market,
which atm is cash rich and opportunity poor.

Uber and Lyft are an optimistic bet. They can't generate profits right now but
(Uber especially) they might find a way. Self driving cars are otw. They could
be in position for that. Regulation is otw. This could give them a moat.

..also efficiency, I suppose. A lot of recent "marketplace" successes (YouTube
rev-share, app stores, steam, iTunes...) are built on thick margins. Uber and
Lyft take 20-25%. Uber & Lyft's main job is software and software scales.
There's no inherent reason preventing them from operating within a profit
producing budget, especially if growth-at-all-costs ends. It'd be hard to
justify the share price though.

Remember that FB went public well before the ad business turned into the money
machine it became.

Not saying it's a good investment. I suspect it's not, but there aren't many
good investments around. etc.

~~~
Balgair
Aside:

> but there aren't many good investments around. etc.

Like, can we talk about this just a sec? I feel this too, that there just
isn't a lot of room left in the economy. But, it just feels like that is
crazy, right?

There is all this money, more than ever before. There is all this technology,
and it's the best that has ever been out there. There is all this education
and learning, we're better at teaching people than we've ever been. And there
are all these people, nearly eight billion of us. Things, objectively, have
never been better!

So, how can we be running out of good investments? It just feels like I'm nutz
here. One one hand, we have all this potential energy, but on the other, there
is just no where for the kinetic energy to go. Humans aren't just boulders on
hill sides, we don't tend to sit still, we get moving on our own.

Why do I feel like I'm missing something big?

~~~
akiselev
_> So, how can we be running out of good investments? It just feels like I'm
nutz here. One one hand, we have all this potential energy, but on the other,
there is just no where for the kinetic energy to go. Humans aren't just
boulders on hill sides, we don't tend to sit still, we get moving on our own._

There's a lot of factors but the big ones I've noticed are healthcare
costs/risks and overall income inequality drastically reducing the pool of
potential entrepreneurs. It's less a problem for software engineers but it's a
significant limiting factor for any venture that's applying software to
specific industries (think transportation, agriculture, manufacturing, etc)
when founders can't get their heads above water long enough to consider a
startup.

Zoning laws are also slowing growth in many cities so a lot of money that
would normally be chasing low risk returns in real estate has to move up the
ladder. The number of things to invest into without relying on a bubble just
can't keep up with the amount of money coming in from fiscal policy and
foreign investors.

~~~
screye
The US IT industry (as a lay person) is the only one where a startup can
feasibly grow quickly enough to justify the investment.

Construction in the US is minimal. The initial costs of any industry with
production, manufacturing are immense. Healthcare is one area where there is
space for clear improvement, but being a rigid to change as it is, healthcare
startups really struggle to penetrate the industry.

You may invest in the service / food industry, but it doesn't seem to be as
hyper-scaling friendly as it used to be. I do not foresee any trend since
Starbucks that has been able to take a country by storm. You can invest in
smaller restaurants, but that is more of a small business investment than
anything resembling stock, so good luck making it a liquid asset, even if
successful.

Also, a lot of investments are mislabeled (often purposely) as tech startups
but are actually some thing else. Uber, Lyft, Airbnb, Coursera, Udacity,
Instacart, Juul, WeWork, and the like are to me, products from a different
industry all the together. The tech aspect of their business does not
influence their success as much as it may seem.

------
justfor1comment
I will have to get a driver's license if this thing crashes. I am part of the
problem why Lyft and Uber lose so much money. I have been so lucky that Uber
and Lyft became ubiquitous just when I was about to get a DL. I decided
against the headache and costs of maintaining my own car. Never got a DL and
kept using ride sharing services everywhere. Also, kept switching between Uber
and Lyft based on who is offering me discounts that week. Seems like my VC
funded lifestyle will come to an end if some new investors don't buy the ride
sharing story.

~~~
__alias
Surely just get your drivers licence regardless? Doesn't it cause pain and
headache not having the ability to legally drive?

On second thought, I guess experience differs a lot based on location. Not
having a drivers licence is pretty unimaginable for me where I live.

~~~
ghaff
I totally get not buying a car under some circumstances given Lyft/Uber,
ZipCar, and traditional rentals. I really have trouble with understanding not
getting a drivers license other than in some very limited circumstances.

Your college friends are not going to give you rides forever. And your work
options, living options, and vacation options are going to be quite limited.
Obviously some people do it, but it's hard to imagine for a typical middle-
class professional over the long term.

Even people I've known in Manhattan who put it off for a few years learned to
drive eventually.

~~~
ent
I don't know, I'm almost 30 and never got the license and know lots of people
who never did either, my wife included. Not having a license has been slightly
annoying maybe around 3 times in my life. Granted, the public transport in my
city (Helsinki) is great, if I moved away I'd probably end up getting the
license.

~~~
ghaff
I guess I understand to some degree. It's a lifestyle choice. I don't go to
some places that would require specialized vehicles and skills like high-
clearance 4WD. And traveling internationally I certainly default to
itineraries that don't require me to rent a car.

On the other hand, I know a lot of city dwellers and even those few who don't
own cars because they don't need one day to day are constantly using either
short-term or longer-term rentals to get around the surrounding area for
various activities. (Or doing those activities with people who have cars
though that tends to become more difficult as your circle of friends gets
older.)

------
DevX101
Anyone else reading the rush to IPOs from so many companies as a leading
indicator of a market top?

~~~
xiphias2
With the bond yield curve inverted VCs know that it's time to sell.

~~~
what_ever
Except that it inverted long after these companies had decided on their IPO
timeline. I am sure everyone will be here with "I told you so" takes if the
market does go down. But if it doesn't no one will remember these predictions.

~~~
gimmeThaBeet
This Matt Levine snippet was relevant yesterday, it's more relevant today,
it's probably going to be relevant every day.

>On the other hand, if you bet that stocks will go down, you have some
compensating psychic rewards. For one thing, occasionally stocks will go down,
and you will be praised for your prescience in predicting the crash, and the
people who were long will be mocked for their complacency. How smart you will
feel!

>For another thing, even if stocks haven’t gone down, you get to borrow
psychically, as it were, against that future moment of glory. You can just go
around sort of saying “this is unsustainable and eventually stocks will go
down and I will be praised for my prescience,” and people will be surprisingly
willing to say “yes that’s correct, I admire your hypothetical prescience.”
Particularly since the 2008 financial crisis, financial markets—and financial
media—have a strongly entrenched narrative of prescient bears and complacent
bulls, a widespread sense that any rising market is suspect and that the
cynical view is always the smart one.

Once again, its strikes me as odd that so many people clamor to call the top
so frequently.

------
komali2
My friends own a flat in downtown San Francisco, about a 30 second walk from
the 4th and King station. They're waiting till the middle of this year to sell
because of the expectation of many new millionaires seeking property after the
Lyft, Uber, slack, and other IPOs.

~~~
shereadsthenews
I hope your friend is prepared to hang on through mid /next/ year, since
that's when the employee lockup expires, assuming this company even exists at
that point.

~~~
mrnobody_67
Banks will loan against asset values. Getting a mortgage for $5m if you own
$25m in stock is a no brainer for any underwriter, even if you can't
technically sell it for 180 days.

~~~
perfmode
Is it legal to seek a loan against locked up public stock?

~~~
patio11
Typically a bank mortgage would be secured by the property, not by other
assets of the purchaser. Some (but not all) stocks / options might be
restricted from being pledged/liened/hypothecated/etc, so they might not be
available for “Loan me $5 million (to buy a house), secured by these shares.”

But because the bank is in the business of making mortgages against property,
it won’t consider the shares as security in most cases. It may consider them
as positive evidence in favor of one’s ability to service a mortgage, much
like it would consider your income as evidence of ability to service the
mortgage. It doesn’t have recourse against your income in event of a default.

(California is a no-recourse stage; talk to a real estate lawyer or similar
professional if you are curious on the precise application to your situation,
HN.)

~~~
bm1362
I’m literally buying a home now, with vested-not-liquid Uber RSUs and the
lender would not honor them as assets.

------
lordnacho
Well I don't want to poop on the parade, but isn't it a little bit
thoughtworthy how rewards are distributed in our modern economic system?

A company that hasn't made money is making its founders generational wealth,
as well as the investors. (Actually is this wrong? Googling seems to suggest
they lost money in recent years. Point is the same though.)

Lyft might never make money, and yet people involved are making out like
bandits. I get that some things will lose money before they make money, and
it's not up to me to decide whether a particular thing should be invested in
by other people.

But it seems if this trend continues, making money becomes more about getting
investors to think they're gonna make money than about making a profitable
business?

~~~
warp_factor
I was thinking about the same thing. It seems this stock is completely
disconnected from the fundamentals and that's what allows it to go so high
(And make the founder//VCs rich).

If we push this logic to the extreme, what would prohibit a stock to be
completely uncorrelated to the company it represents? What if at some point a
stock is traded based purely on the hype and the idea that someone else will
eventually buy it for even more eventually later on? This seems to be what's
going on with this IPO, it is 100% speculation that someone dumber than you
will eventually buy it for even more. Back in the days dividends and voting
rights were used to keep the stock inline with the company's fundamental, but
in this specific case, why is the stock related at all to the company since
there are no voting right nor dividends?

------
samfisher83
How is a company that makes no money in a commodity business worth so much. FB
and Google had a monopoly. What moat does Lyft have to justify the valuation
(24B)?

~~~
djsumdog
How long do people think Uber and Lyft will continue before they collapse? 5
years? 8? I have a hard time see them still being around 10 years from now.

I'm more interested in what will happen after. Will local city Taxi apps fill
in the gap? There are a few companies that brand/sell apps for multiple cities
that could potentially offer multi-city service.

I think eventually, the price of rides will go back to where it was in the
pre-Uber Taxi days, or at least fairly close. It will be several years though.

~~~
luckydata
I think there's a case for those companies surviving like Expedia and Orbitz,
a staple of the business they are in but nowhere near the stars we made them
out to be. The resizing process will be painful mostly for the rank and file,
investors and founders will do alright.

~~~
samfisher83
Expedia market cap is 17b Lyft is 24b

~~~
jhall1468
Expedia isn't a growth company, Lyft is. The question at this point becomes
whether or not Lyft can make money, and at a scale to be worth that valuation
now.

~~~
adventured
It's still an extraordinarily bad mis-pricing even when you account for the
growth.

Lyft is being given a ~40% valuation premium over Expedia, with 20% of the
sales and none of the profit (Expedia generated $842m in operating income last
year).

What's the growth assumption on Lyft to justify the extreme risk imbalance in
that equation? That they're going to do $15-$20 billion in sales within six to
eight years? And that even if they manage to accomplish that somehow (while
surviving Uber), they might only be worth then what they already are now as
their growth inevitably slows considerably (removing the huge growth premium,
contracting their sales etc multiple). It seems likely to end in disaster
given the wild outcome required to justify the present pricing.

~~~
jhall1468
But this is what institutional investors want. They want to see hyper-growth
and high burn rates to increase revenue and market share above all else.

But I think anyone that suggests a certain outcome in the market is "likely"
is making some enormous assumptions. I wouldn't invest in a high-risk IPO like
this, but the outcome isn't "likely" to end in disaster. Lyft is spending an
enormous amount of money on R&D and new market entry.

Analysts have for years told us how a valuation at IPO is "never" going to
work and been proven wrong time and time again. As a result, I treat both
Lyft's potential as I do analyst recommendations: with a grain of salt.

------
blegblarh
Does anyone here rely on Lyft or another rideshare for their business? I work
for in the healthcare sector and we rely on rideshare quite a bit to ensure
our members can reach their doctor's appointment, etc.

I would say around 50% of our trips are rideshare and the rest are local
transportation companies; While Lyft isn't perfect I can't help but wonder if
they are going to alter operations greatly whether it is to phase out their
healthcare operations or buy us out.

I am curious if anyone has some insight as to how Lyft plans on continuing
their operations.

Here is a link to some of the services Lyft offers if you are curious:
[https://www.lyftbusiness.com/healthcare](https://www.lyftbusiness.com/healthcare)

~~~
mattparmett
Rideshare is certainly important in the healthcare world for NEMT (non-
emergency medical transport). Both Lyft and Uber have built out health-related
teams and business lines recently to address the NEMT market. [0]

Prior to rideshare companies entering this market, there were legacy
transportation "brokers" that coordinated and provided NEMT services - the
largest and most well-known being Logisticare.

Recently, newer companies have been started in the NEMT space. One example is
Circulation [1]. These companies may provide transportation services directly,
but also sit on top of existing rideshare companies like Lyft. Circulation and
Lyft formed a partnership in December 2017 [2]. Circulation was actually
recently acquired by Logisticare.

So the answer to your question - rather than relying on a single rideshare
company for your NEMT, consider using a broker (either old-school or new-
school) that diversifies your rideshare exposure and abstracts away the actual
rideshare companies from your workflow.

(Disclaimer: the VC fund I work for was an investor in Circulation before they
were acquired, but we're no longer invested.)

[0] [https://www.uberhealth.com/](https://www.uberhealth.com/) [1]
[https://www.circulation.com/](https://www.circulation.com/) [2]
[https://www.businesswire.com/news/home/20171205005862/en/Cir...](https://www.businesswire.com/news/home/20171205005862/en/Circulation-
Lyft-Partner-Non-Emergency-Medical-Transportation)

------
hnburnsy
Is Lyft losing money because they are offering a service below cost or because
they are spending on marketing to acquire and protect market share? One seems
unsustainable and one seems manageable.

~~~
gniv
> Is Lyft losing money because they are offering a service below cost or
> because they are spending on marketing to acquire and protect market share?

I would say the latter mostly. See page 17 of their S-1:
[https://www.sec.gov/Archives/edgar/data/1759509/000119312519...](https://www.sec.gov/Archives/edgar/data/1759509/000119312519059849/d633517ds1.htm)

~~~
hn_throwaway_99
How do you make that conclusion based on that data? Lyft's total operating
loss is greater than _all_ of their sales and marketing expenses! And I'm
assuming all their promos and specials fall in that sales and marketing
budget, so if they cut that budget their revenue would tank.

Honestly, I like Lyft as a rider, but this feels like a total pump-and-dump. I
predict their stock looking like Groupon's trajectory at best.

------
cleandreams
I'm worried about the impact of collapsing valuations of Lyft and Uber. Out of
curiosity, does anyone know what big successful companies have gone public
when they were losing large amounts of money? What happened to the stock
price?

~~~
linuxftw
Twitter. Has been a (large) net loss since IPO, just finally started turning a
profit.

Ultimately, depends on what you mean by success. I don't know of any companies
that were VC cash burners, IPO'd, and then delivered great results over the
next 5 years. I'd say that some must exist, surely, just don't know which they
are.

~~~
screye
To add to your point,

Twitter's current stock price sits at ~75% of their IPO and their number of
active users peaked at Q1 2018 (most likely boosted by Trump) and have been
decreasing since. Twitter's situation may be worse than people think.

Hardly a success.

~~~
linuxftw
I'd say, as a brand twitter is successful. As an investment, probably not as
much.

------
throwawaylogs
I don't mean to be super negative but I don't see this going well.

They are losing a billion a year and have the worst self driving tech.

Their self driving tech is built on top of Baidu's open source platform and
another open source platform with only 1 year of development with a huge team.
A recipe for disaster.

They only have 1 year of development and scant few of their technical leaders
- including their VP - worked in self driving before starting at Lyft.

I don't see how they survive.

~~~
buttcoinslol
You're making the (implied) assumption that self-driving vehicles will be
successful, and furthermore, deployed across a wide geographic area.

I would invite you to come to Minnesota in the winter and drive a car for a
few weeks, and then proceed to make the same (implied) claim.

~~~
ngngngng
Do you not think there's a market for self driving cars that only operate in
good weather? I live in the mountains and we get a ton of snow. But there are
very few times where snow is actually on the ground.

------
whoisjuan
Just wait one year. After two or three earnings releases its market cap would
be under $10B.

------
dnate
I'm not too knowledgeable when it comes to finances. But isn't it possible to
bet against a stock? As in someone promising you to buy stock X at price Y at
future date Z? So when the stock dips, you make money.

If yes, and this is such a clear cut case (again, I know very little about
finances, just going of the comments here), shouldn't this be easy money?
Hell, I would bet against it if I had any betting money.

~~~
gibybo
>But isn't it possible to bet against a stock?

Yes, there are a few ways to do it.

>As in someone promising you to buy stock X at price Y at future date Z? So
when the stock dips, you make money.

This would be either a put option or a future (depending on whether you have
the option or the obligation to sell it on date Z), but it carries the risk
that the market will not lower the price prior to date Z. Put options also
aren't available at the same time as IPO, I believe LYFT puts won't be
available until late next week.

You can also short the stock, which is simply borrowing shares from someone
else, selling them, then buying back the shares at a hopefully lower price to
repay the loan at a later date. The advantage is that you don't have to
specify a certain date, but you may be forced to pay back the loan earlier
than you'd like if the price increases beyond your collateral or more people
want to borrow the stock than lend it.

>If yes, and this is such a clear cut case

The reality is that this isn't actually such a clear cut case. There are many
people with billions of dollars at their disposal betting both ways. Some will
be right, some will be wrong. The price they (and everyone else) have agreed
to bet against each other with will be the market price.

------
klaudius
I suggest everyone read Hubert Horan series on NakedCpitalism. Here's the
latest article: [https://www.nakedcapitalism.com/2019/03/hubert-horan-can-
ube...](https://www.nakedcapitalism.com/2019/03/hubert-horan-can-uber-ever-
deliver-part-eighteen-lyfts-ipo-prospectus-tells-investors-no-idea-
ridesharing-ever-profitable.html)

------
sparkling
Can anyone explain why Uber needs 16.000+ employees (this figure does not
include drivers)? I don't see why the whole operation can't be run by
~1000-2000 people.

------
josh_carterPDX
90% of Lyft drivers work there while having another job or while looking for
full time work.

At $72 per share I'm sure they can afford to invest in the company they made
so valuable. :-/

~~~
radicalriddler
These days I believe that fractional investing is more common, so firms such
as Betterment will allow an investor to purchase half a share and sorts.

This doesn't take away from your comment completely though, most Lyft drivers
wouldn't have the spare income to invest into the company, it's just not
because the share is $72 that they can't invest.

But it's because they've pushed so much into this share price, that surely
they could've put more money into drivers pay, instead of lining their
corporate overlords pockets.

~~~
josh_carterPDX
Absolutely.

If you consider a $40 ride will only yield about $25 for the driver, there is
a lot of room to give more to drivers.

Sad to see this sort of cash grab by the current Lyft shareholders.

~~~
tmh79
are you kidding?

Lyft is loosing 1B/year

there is no "free money" to give out to anyone, engineers, drivers, marketers.
its a tight market.

------
aboutruby
Looks like Uber would be a $90B - $120B valuation, so about ~1/4th of Uber.

Uber has ~15 millions daily trips, while Lyft has ~2 million daily trips.

~~~
msoad
Trips in United States are a lot more expensive on average

------
bfrog
Intuitively I want to short this, but realistically bandwagon buyers will
probably drive the price up.

------
dawhizkid
I would short out the gate...

------
pl0x
Congrats to the entire lyft team. Maybe Waymo may acquire them in the future?

------
bitxbit
I just don’t see how Uber and Lyft survive past autonomous vehicles going
mainstream over the next two decades.

------
nodesocket
I am watching this IPO with keen interest. If it goes well, in terms of market
day open to close, perhaps that suggests that the Uber IPO will be a similar
success. I also want to participate in the Slack IPO as well.

~~~
danvayn
I dont think I would participate in a slack IPO. More competitors pop up each
day and I dont see anything particularly unique about their approach that
would keep companies interested in keeping their services. Full disclosure
though, I have not used their product in years. Maybe its not as slow and
bloated anymore, but I dont see whats stopping another trendy team chat app
from coming along and posing a threat by the time they go public.

~~~
deanmoriarty
Very respectfully, I personally think your comment is very out of touch with
reality and might end up having the same accuracy as the one that was
criticizing Dropbox for not being particularly unique [1].

Slack is immensely viral, in Silicon Valley it's basically used by almost
every single tech person, its network effect is gigantic. When I glimpse at
people's phones on public transportation, a large portion of folks are
interacting with Slack. And that's not only used in startups, also in massive
companies, both big "old" enterprises such as IBM as well as "new" enterprises
like several FAANGs.

[1]
[https://news.ycombinator.com/item?id=9224](https://news.ycombinator.com/item?id=9224)

~~~
Q6T46nT668w6i3m
I don't know if you're right, but Dropbox's 52-week high was 43.50 and its low
was 18.50. It closed today at $21.72.

