Breakingviews - Lyft takes some gas out of Uber’s IPO

FILE PHOTO: Lyft supporters gather for the Lyft IPO as the company lists its shares on the Nasdaq in the first-ever ride-hailing initial public offering, in Los Angeles, California, U.S., March 29, 2019. REUTERS/Mike Blake/File Photo

NEW YORK (Reuters Breakingviews) - Lyft is likely to take some gas out of Uber Technologies’ initial public offering. The smaller ride-hailing app beat revenue estimates in the first quarterly results since its listing, and burned less cash. But its rate of growth is slowing, making profit an ever-more distant goal.

The perceived promise of transport that consumers can summon with a tap on their cellphones, and a dearth of recent big IPOs, has created a fertile market for both companies. Lyft raised $2.2 billion in March and saw its stock pop over 20 percent initially, briefly hitting a market capitalization of some $30 billion. But the company’s unprofitable reality has since sapped investor enthusiasm. After it reported a $1.1 billion loss for the first quarter on Tuesday, the shares briefly dipped in after-hours trading to a level more than 20 percent below the IPO price.

There are encouraging signs. Revenue of $776 million was up 95 percent from a year earlier, and the rate of cash burn nearly halved, to just under 11 percent of revenue. But the company’s overall expansion is decelerating, which will make it harder to turn a profit. Lyft projects revenue will grow by 52 percent for the year, half the rate of 2018, while adjusted EBITDA will be negative to the tune of nearly $1.2 billion.

At least the company was first out of the blocks. Market leader Uber is due to price its offering on Thursday. It’s seeking a market value of up to $84 billion based on the top of its indicated price range, and underwriters led by Goldman Sachs and Morgan Stanley will almost certainly find willing buyers. But it is growing slower than Lyft and burning cash at a faster rate. Despite the advanced technology, disappointing ride-hailing apps may turn out to be like the proverbial city bus: a long wait, and then two come at once.


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