Lyft to Increase Its IPO by $2.4 Billion

March 20, 2019

Those who keep an eye on the stock market will definitely have the ridesharing startup Lyft on their radar, as the company plans to go public in the next couple weeks. Originally valued at $21 billion USD, Lyft plans to increase its initial public offering, or IPO, by $2.4 billion. This increase will bring up the value for the company to above $23 billion.

When it goes live, Lyft’s trading symbol will display as “LYFT” on Nasdaq. Lyft plans to set its IPO range for between $62 and $68 per share to sell their goal of 30,770,000 shares of Class A common stock. In addition to the Class A common stocks, the company also plans to sell an additional 4,615,500 shares as options for the underwriters, adding up to the 35 million share figure.

Lyft plans to bring the company public is for the purpose of funding its growth. Upon completion of the IPO, Logan Green, Lyft’s CEO and co-founder, will retain a 29.31 percent share of the voting power of the outstanding Lyft stock. John Zimmer, Lyft’s President and co-founder, will have 19.45 percent.

Lyft Is Growing Fast

Lyft’s revenue has been growing fast over the past year, with the company accepting $8.1 billion worth of bookings in 2018. After adjusting the figure by including its costs and other expenses, the Lyft app managed to make $2.1 billion in revenues for the year of 2018. This revenue covers the 30.7 million riders and 1.9 million drivers that utilized the ride-hailing app during 2018.

Lyft Still Remains Unprofitable

Despite such impressive numbers, Lyft still has not managed to turn a profit. Lyft reported a net loss of $911.3 million for the year of 2018. The trend of remaining unprofitable can be seen as Lyft’s revenues for the year of 2016 were also not enough to cover expenses, with the company reporting a revenue of $343.3 million and a net loss of $682 million.

In 2018, Lyft’s share of the United States ride-hailing market share was 39 percent, a 17 percent increase from its 22 percent share recorded in 2016. However, Lyft’s executives have made it clear that they are concerned that Lyft may struggle to turn a profit, despite its rapidly growing market share.

What Is Lyft?

Founded in 2012 as Zimride, Lyft is a ride sharing app that allows users to hail a ride straight from their smartphone. It operates in 46 states throughout the United States and began operating throughout Canada in 2017. Ridesharing is the main idea of Lyft, as its drivers are technically independently contracted to drive for the company. With that said, those who drive for Lyft share their car and services with their riders that the Lyft app connects them to.

How Does Lyft Work?

Users are able to set their location and destination in the built-in map, which calculates an estimated cost for the fare. Those with Lyft drivers around them will notice cars moving throughout the map, an indicator of drivers that are nearby them at that moment. After a rider chooses their route, they’ll be able to choose from a variety of cars based on the amount of space they require.

Ride options offered through the Lyft app are:

Shared Ride – The cheapest available option provided by Lyft. Users will share the ride with another rider in route to their destination. This feature is not available in all cities throughout the U.S. and Canada.
Lyft – The basic and most popular option for a ride on Lyft. It is standard and matches with any typical driver nearby.
Lyft XL – This option is similar to Lyft with the exception that it is for riders that require a vehicle that can seat at least six people.
Lux – This option matches riders with a luxury vehicle that can sit up to four people.
Lux Black – This option matches riders with a luxury vehicle that has a black exterior. It also can seat up to four people.
Lux Black XL – This option is typically the most expensive option. It matches riders up with a luxury vehicle that has a black exterior and that can fit up to six people.

Finally, riders are able to select their payment method (PayPal, Credit Card, Cash), and the app will send the ride request and route to the nearest driver. Once that driver accepts the ride and fare, the app will calculate the distance between the driver and rider. The rider will receive the estimated time of arrival of their driver as the app shows the driver’s location in real time.

The cost of a ride can be shared between friends. In addition, riders may tip their driver via the app if they choose to do so. At the end of the journey, the rider will be asked to give their driver a rating, which is used by Lyft to give potential riders an idea of whose car they’re getting into, as well as a way to filter out bad drivers from the service.

Starting with Lyft

Lyft will present you with a map, your current location as well as any drivers nearby. To begin, riders must tap "search destination" and select the route that they wish to take.

Choosing a Car

Depending on how many people are in a party, the rider must choose what type of vehicle they would like to request. The Lyft app will estimate the price of the fare and display it next to the vehicle selection. Riders are able to select their payment type & schedule a pickup if they require to do so.

Initiating the Ride

After a rider confirms what type of vehicle they would like to request, the app will search for a nearby driver and display the estimated time of arrival. In addition, the app will display the journey in real-time.

Lyft vs Uber

When it comes to apps that specialize in ridesharing, Uber is typically the one that most will turn to. While it may seem that both are virtually the same, there are some differences between the two companies. Depending on who you are, where you live and what type of service you require, your go-to ridesharing app may not always be Uber by default.

The Main Differences

For starters, Lyft can only be used in the United States and Canada, while Uber operates in 58 countries and over 300 cities around the world. Uber first began operating outside of the United States in July 2012, with the company launching its services in London, United Kingdom. As stated above, it wasn’t until 2017 that Lyft expanded its services beyond the United States’ border into Canada.

With that said, it’s clear that Uber outnumbers Lyft in terms of the numbers of rides it has each year. Despite both companies offering a 24/7 service, Uber is able to generate more revenue through rides thanks to the advantage of operating globally.

Both companies offer up-front reservations. However, those riding with Lyft may experience longer wait times than those riding with Uber, as Lyft has less drivers than Uber does. Lyft requires their drivers to be 21 years old, while Uber’s age requirements vary from city to city. Both do a background check and typically require that their driver does not drive a car that exceeds 10 years old.

Some cities have special requirements for those who offer driving services. For example, Uber and Lyft drivers in New York City must possess a TLC driver’s license. These licenses are specifically for both taxi drivers and for-hire (FHV) drivers.

The Difference in Pricing

The biggest deciding factor for most is the difference in pricing between each app. While both apps price their rides similar to one another, there are several factors that may increase the price of a ride on each platform.

Both Lyft and Uber start their rides at $1, with a per-mile charge of $1.50 and a per-minute fee of 25 cents. When traffic is heavy, both Lyft and Uber drivers may initiate a “surge-time” price increase, which increases the price during heavy traffic conditions. When the demand for drivers is high, surge-time price increases typically follow.

Each app approaches how they price rides during surge-times in their own way.

Lyft uses a surge pricing model that uses a percentage-based formula. For example, Lyft passengers riding during rush hour will typically see their fare increased by 50 percent, making a $20 ride cost $30 instead.
Uber uses a multiplier surge pricing model, which adds the surge rate to the price of the ride. This typically doubles the price of the ride.

Both companies provide an alert to the rider before they book their ride that the prices are increased during surge-time. The ending price will vary depending on the city, the traffic conditions, the demand for a driver, the total mileage of the ride and the time of day.

Lyft Could Become Profitable in 3 Years

Economic analysists at Morningstar, a global financial service firm, have predicted that Lyft will turn a profit by 2022. Unlike Uber, Lyft focuses exclusively on ridesharing services. Uber entered the food delivery and logistics business industry in 2014, diversifying the types of services the company offers.

With Lyft’s market share continuously growing each year, along with the money gained from its IPO scheduled to go live in the next few weeks, there definitely is a great chance that Lyft will be able to break even in the next couple years.

However, Lyft and its investors still face two threats that may disrupt the company’s growth and ability to break even:

State regulations that limit the growth of Lyft
A new competitor in the ride-sharing industry

Regardless, financial investors still are confident that Lyft will succeed in breaking even and become profitable thereafter.