The IPO Season

As the days count down before the Fall semester begins we’ll be looking back at some of the biggest events and news from this summer. Today will feature two of the most anticipated IPOs of the year, Uber and Lyft, and how their stocks have performed since going public.

On Thursday, March 28th, Lyft Inc. launched its IPO at a price of $72. It was valued at $24.3 billion and by the end of its first day of trading on March 29th, it was worth $26.6 billion. That valuation however, tumbled to $19.8 billion by the following Monday with the stock price closing at approximately $69. At the time of writing (Friday, August 16th) Lyft’s stock is priced at $52.47 with a market cap of $15.4 billion. Since Lyft went public before Uber, it set the stage for how Uber would determine its pricing and how it would try to avoid the same decline as Lyft.

Amid rumors that investors were already planning on shorting the stock, Uber Technologies Inc. priced its IPO at $45 on Thursday, May 9th. This resulted in a total valuation of $75.46 billion. This price and valuation are on the lower end of what Uber would’ve wanted, especially since it was rumored that they were seeking a $120 billion valuation when news first broke out about their preparations to go public. On its first day of trading on May 10th, the stock dropped 7.6% and closed below $42 per share. As of today, the stock is priced at $35.23 with a market cap of $59.89 billion.

With both ride-sharing companies being highly unprofitable, they are trying to figure out ways to cut costs and improve their numbers. Recently, Lyft’s CEO Logan Green went so far as to say that this year would be Lyft’s peak loss year on its road to profitability. Uber has also invested more in its food delivery services, Uber Eats, as a way to earn more revenue and diversify its business. To cut down on costs, both companies have been investing in self-driving cars with the idea that one day they can replace some of their drivers with an autonomous fleet. Currently your Uber or Lyft rides are subsidized by the money of venture capitalists and investors that foresaw a revolution in transportation, allowing Uber and Lyft to undercharge customers and offer frequent discounts in order to build market share. However, ride prices have been increasing as it becomes costlier for them to maintain operations.

While their stock prices may have dropped, Uber and Lyft’s IPOs generated the necessary investments that they were looking for in order to continue growing their operations. With everyone eagerly watching, the race continues to see which ride-sharing titan can become profitable first.

Abril, Danielle. “Lyft Stock Tumbles Two Days After its IPO.” Fortune, 1 April 2019.

Feiner, Lauren. “Uber ends its first day of trading down more than 7%.” CNBC, 10 May 2019.

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