Lyft to woo investors with fast U.S. growth in IPO race
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[February 15, 2019]
By Heather Somerville and Joshua Franklin
SAN FRANCISCO/NEW YORK (Reuters) - Lyft Inc
will pitch investors on its fast growth in the United States as it seeks
to beat out Uber Technologies Inc to become the first publicly listed
ride-hailing company, according to people familiar with the matter.
Lyft plans to tell investors its U.S. market share is approaching 40
percent, up from 35 percent in early 2018, the people said. The company
has pushed aggressively into smaller and mid-sized cities. Lyft
currently serves more than 600 American and Canadian cities, three times
more than in early 2017.
San Francisco-based Lyft is under pressure to sell investors on its
prospects as it races neck-and-neck with Uber to an initial public
offering (IPO) that could come as early as the second quarter of 2019.
If Lyft gets to list first, it would avoid being judged by the valuation
given to its larger rival.
Uber remains the undisputed king of ride-hailing in terms of size. Its
revenue for the third quarter of 2018 was $2.95 billion, up 38 percent
from the prior year. It operates in about 70 countries and also has
businesses in freight hauling, autonomous driving, food delivery, air
taxis and artificial intelligence research.
In contrast, Lyft is available only in the United States and Canada. And
it has stayed tightly focused on its core ride-hailing service. Lyft has
kept its financials secret.
It is estimated to be worth between $20 billion and $30 billion,
compared to Uber's prospects for a valuation of up to $120 billion. So
Lyft will be seeking to assure IPO investors it represents an attractive
bet compared to its more established competitor, people familiar with
its marketing strategy said.
Lyft has benefited from a spate of scandals that rocked Uber in 2017,
including allegations of sexual harassment made by its female employees,
the forced resignation of its chief executive officer and its use of
illicit software to deceive regulators. A #DeleteUber campaign surged on
social media. The negative publicity helped Lyft attract new drivers and
riders without spending much on marketing.
Given that both Uber and Lyft are still losing money, investors will be
focused on their growth and potential for future profitability. Lyft has
prepared some earnings metrics it hopes will persuade investors that it
will not be in the red for long, the people familiar with its strategy
These include its overall growth in ride bookings, the total number of
rides per passenger, the commissions it earns from drivers, and the
percentage of rides across its different ride types, particularly its
growing carpooling service, the people said.
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An illuminated sign appears in a Lyft ride-hailing car in Los
Angeles, California, U.S. September 21, 2017. REUTERS/Chris Helgren
Lyft declined to comment.
"The IPO market will be focused on growth," said Jim Williams, chief investment
officer of Creative Planning Inc, a wealth and investment manager in Overland
Park, Kansas. His firm advises clients who already own shares in Lyft and Uber
as well as those considering buying stock in the companies.
Investors will be assessing the companies based on the number of new riders and
total rides, Williams said.
They will want to know, "Are these companies expanding?" he said.
(For a graphic on global growth projections for ride sharing, see: https://tmsnrt.rs/2V51lqr)
UBER TOUTS DIVERSIFICATION
Uber reported sharply slower global bookings growth in the third quarter of
2018; that figure slid to 6 percent over the previous quarter in a business that
had routinely been expanding by double-digit percentages.
People familiar with management's thinking say Uber executives are concerned
that if investors judge the company by the same yardstick as Lyft -- focusing on
the number of rides it sells as opposed to its other initiatives -- its
valuation could suffer in an IPO.
Uber plans to portray itself to IPO investors as a global logistics and mobility
platform, and will spend less time on metrics specific to its core ride-hailing
business, the people said.
Uber declined to comment.
Over the last year, Uber CEO Dara Khosrowshahi has sought to direct investor
attention to food-delivery business Uber Eats, whose revenue grew 150 percent in
the third quarter over the previous year.
Uber and Lyft continue to diverge, offering different financial opportunities to
IPO buyers, according to Anna-Marie Wascher, CEO and founding partner at Flat
World Partners, an investment management firm that made an early Lyft
"With Uber, you will invest in Uber Eats and global expansion," Wascher said. "Lyft
will get investors betting on the U.S. ride-hailing market."
(Reporting by Joshua Franklin in New York and Heather Somerville in San
Francisco; Additional reporting by Carl O'Donnell and Jessica DiNapoli in New
York; Editing by Greg Roumeliotis and Marla Dickerson)
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