Lyft Rockets Onto Public Markets With $2.3B Raise

Exceeding expectations, the ride-hailing start-up Lyft raised $2.3 billion on March 28, after pricing its shares at $72, the top of its pricing range. That equates to a market valuation of $24 billion for the company.

Lyft shares opened for trading today at $87.24, above the public offering price.

The initial public offering (IPO) marks a major triumph for Lyft, which beat its arch-competitor Uber in the race to go public and helped shift the ride-hailing industry from a private gig economy business into a formidable Wall Street player.

Launched in 2012, Lyft transformed the way millions of people get around in cities, and attracted billions of dollars from investors eager to stake a claim in the fast-growing mobility sector. Prior to its IPO, Lyft raised $5.1 billion in debt and equity funding, reaching a valuation of $15.1 billion last year.

Reflecting strong demand, the number of shares to be sold was increased to 32.5 million from 30.8 million.

But now that Lyft has hit the public market, questions remain whether the tech-transport pioneer can leverage the momentum into profitability, and what the IPO means for the future of the "sharing" economy and mobility start-ups eager to trod the same path.

As many analysts have noted, Lyft posted huge losses – $911 million on revenues of $2.2 billion – in 2018.

"Lyft is still losing a lot of money, so it's very much a jam tomorrow, not today, proposition for investors who are in for the long haul. One question is the pathway to profitability and timeline – unclear," noted GlobalData in a release.

Lyft has invested in other modes of transit like bike- and scooter-sharing. For example, it bought Motivate in 2018, a bike-sharing company after Uber bought Jump.

But both companies face competition from other shared mobility companies. Autonomous vehicles and regulations also pose a threat.

"It is unclear how much demand there will ultimately be for ride-hail vehicle services globally; the future urban mobility landscape [is] being shaped by a dynamic mix of transport modes," according to the Global Data note. "And barriers to entry in ride-hail are low, so competition is an ever-present threat unless a significant scale-based cost advantage emerges."

The specter of Uber, which is expected to go public in April, also looms large.

Lyft claimed 39 percent of the U.S. market at the end of 2018. Uber, which reported revenues of $3 billion in the fourth quarter of 2018, commands a much larger market share – although Lyft is growing at a faster rate. In February, Uber accounted for 67.3 percent of U.S. rideshare spending, and Lyft captured 30.3 percent of the market, up 5 percentage points from a year ago.

Uncertainties notwithstanding, the Lyft IPO clearly represents a watershed moment for the mobility sector and a maturing generation of tech start-ups. Besides Uber, others expected to go public in 2019 include Pinterest, Slack and Zoom.

Lyft was funded early on by venture firms including Floodgate, K9 Ventures, Mayfield Fund and Peter Thiel's Founders Fund.

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