Uber’s size may rob smaller Lyft of its IPO oxygen
Uber Technologies Inc. and smaller rival Lyft are driving side-by-side on the road to a stock market debut, and that may not bode well for Lyft as investors decide where to place their bets in the ride-hailing sector.
Uber and Lyft both submitted confidential IPO filings with the US Securities and Exchange Commission (SEC) last Thursday, suggesting that their public offerings could take place in close proximity, unless one decides to take a pause.
Some IPO investors interviewed by Reuters said two IPOs in quick succession could force them to choose between Uber and the smaller and less diversified Lyft.
“The advantage of being first to market with your IPO is the ability to control your destiny without being impacted by how the competing IPO is performing in the public market,” said Jim Williams, chief investment officer of Creative Planning Inc, a wealth and investment manager.
The first company to debut will get to define the sector in the eyes of stock market investors.
Uber will likely draw investor attention to its larger market share and wider business operations, such as freight hauling and food delivery, while Lyft will play up its smaller but highly focused ridehailing business, said people close to both companies.
Lyft operates in the US and Canada and the majority of its business is ride-hailing, although, like Uber, it recently got into bike and scooter renting. It expects to be valued at between $20 billion and $30 billion in an IPO, sources have said.
Uber, on the other hand, operates in more than 70 countries — although like Lyft it is also still unprofitable. Investment bankers have said it could be worth as much as $120 billion in an IPO, which would be one of the largest on record and would likely sap most of investors’ appetite for ride hailing.
“Very large IPOs can be hard to absorb into the market,” said Kathleen Smith, founding principal at Renaissance Capital, a manager of IPO-focused exchange-traded funds. “It would not be favorable if Lyft and Uber come to market at the same time.”
Sources said there has so far been no change to Lyft’s IPO plans in light of news of Uber’s following suit. But sources close to Lyft said it lost precious time by not pulling the IPO trigger while Uber faced a number of challenges and scandals last year.
Throughout 2017, Uber was pummeled by a series of controversies.
CEO Dara Khosrowshahi, who was named to the top spot in August 2017 after Uber co-founder Travis Kalanick resigned under investor pressure, and his leadership team have attempted to reset the workplace culture and clean up the messes.
Spokespeople for Lyft and Uber declined to comment.
“It would have been a particular advantage for Lyft to have gone earlier when Uber was under a lot of pressure from a PR perspective,” said Alex Wellins, co-founder of IPO advisory and investor relations firm Blueshirt Group.
To be sure, Uber and Lyft could decide to space out their IPOs. And if the recent stock market volatility continues, the companies may change their IPO plans altogether.
Uber has a history of maneuvering to one-up Lyft and appear to be a step ahead of its rival. In 2014, as Lyft was preparing to launch its carpooling service, Uber rushed to publicly announce its own carpool, even though it did not have the service ready, according to people familiar with the matter.
Uber must be thinking it “did all the heavy lifting, took all the risks,” said Santosh Rao, head of research at Manhattan Venture Partners, a Lyft investor. “They can’t let Lyft take the credit and define the expectations of investors.”