Weekly Brief: Lyft’s IPO Proves Investors Optimism Over Ride-Sharing

Want a slice of the gig economy? Now you can own one.

With the completion of its IPO last week, Lyft became the first gig-economy start-up to become a publicly traded company and what a debut it was. After much speculation, Lyft listed its public offering price at $72. Shares opened at $87.24 the next morning and jumped 20% from there. Some of the air came out in the afternoon but, when the closing bell rang, Lyft’s shares were up nearly 9% on the day and the company was valued at $26.4Bn. That makes it one of the most valuable companies to ever go public in the US and more valuable already than traditional transportation companies like Hertz, Avis and United Airlines.

What does Lyft’s monumental IPO mean? For one thing, expect big investments to keep rolling in for businesses that are changing mobility. We’re riding on the leading edge of a whole new world here and no one knows for sure where it’s going. How pervasive will self-driving cars become? Will traditional taxis disappear? What about bike-sharing and scooter-sharing and self-driving trucks that move across the country in giant platoons? A veil of uncertainty hangs over all of it and yet, as Lyft’s IPO shows, that uncertainty is a risk most investors are happy to take on in search of historic returns.

Lyft is losing almost a billion dollars a year right now but its growth numbers are off the charts. Lyft’s customer base was 6.6 million in 2016. That number ballooned to 18.6 million by the time 2018 drew to a close, which is tantamount to almost 50% growth year-on-year. Over that same time period, total rides on the Lyft platform grew from 50 million to 180 million. That’s the type of high-growth potential that doesn’t come along very often.

Is it possible that Lyft never turns a profit? Sure it is. It’s also possible that it will usher in an entirely new way of moving people from point A to point B, eliminating traditional car ownership in the process, sending taxi drivers out of business and making a lot of Lyft investors very wealthy in the process.

All of this bodes well for Uber’s IPO, which is expected any month now. Lyft is a minnow compared to Uber when it comes to ride-sharing on a global scale. Uber commands about 70% of the US ride-sharing market. It has operations in more than 60 countries and 400 cities worldwide. It owns a significant chunk of China’s largest ride-sharing company Didi Chuxing, and it has branched outside of straight ride-sharing into food delivery, freight delivery, self-driving cars and scoot sharing. Granted, Uber has struggled over the past couple of years, much to Lyft’s benefit. Its CEO came off the rails and one of its self-driving cars hit and killed a pedestrian in Tempe, Arizona. Yet, it remains the largest ride-sharing business on the planet. Given that investors are clearly in the mood for high-growth potential investments, don’t expect the love to stop with Lyft. If anything, Uber is likely to get even more of it.

Investors expect Uber to go public at around $120Bn, making it one of the most valuable IPOs ever. While this is all great news for the fledgling gig economy, what it means for the drivers who power it is unclear. Watchdogs, governments and drivers themselves have already raised major concerns about whether it’s possible to make a stable job driving for the likes of Uber or Lyft full time.

Now that the gig economy is beholden to public investors, expect the squeeze to become even tighter. With Uber and Lyft more in the public eye than ever, it may put increased pressure on them to raise wages for their drivers. It also may incentivize them to eliminate those drivers completely with autonomous tech under the hood.

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