Lyft Inc., the No. 2 U.S. ride-hailing giant, soared Friday in its stock-market debut after raising $2.34 billion in an initial public offering that priced at the top of an elevated range. That sends an encouraging signal to the stampede of Silicon Valley companies lining up to go public this year.
Shares opened at $87.24 — 21% above the IPO price of $72 — and closed the day up 8.7% at $78.29. That gives the company a market value of about $22.4 billion.
Lyft co-founders Logan Green and John Zimmer rang the Nasdaq opening bell from a driver center in Los Angeles, and shares started trading a couple hours later. The pair will maintain near-majority control of the company through Class B shares that each carry the voting rights of 20 ordinary shares.
Green and Zimmer, who founded Lyft in 2012, saw their combined stake in the company rise to about $1.4 billion — about $800 million and $600 million, respectively — as the shares climbed Friday. Early backers of the company hold larger positions. Hiroshi “Mickey” Mikitani’s e-commerce group Rakuten Inc. owns $2.7 billion worth of the Class A shares. General Motors Co. has a stake worth about $1.6 billion.
San Francisco-based Lyft sold 32.5 million shares after initially marketing 30.8 million shares at $62 to $68 each. It increased the range to $70 to $72 the day before the IPO was set to price. Shares are trading on the Nasdaq Global Select Market under the ticker symbol LYFT.
“What happened today was good. This IPO is clearly a giant success,” said Barrett Daniels, a Deloitte partner who specializes in IPOs. “It’s been masterful.”
The trajectory could change, Daniels cautioned: “We don’t know how the stock will perform in the long term, but this morning feels like the first step in a potentially historic year for IPOs.”
Before the opening bell Friday, Lyft announced the launch of Lyft City Works, a program that will begin in Los Angeles to provide transportation and develop transportation infrastructure with an emphasis on clean energy. Lyft pledged to donate $50 million or 1% of profits, whichever is greater, each year to support transportation initiatives in partner cities. (Lyft is not profitable; it lost more than $900 million last year.) Los Angeles is to get $5 million.
Lyft City Works will work with organizations in L.A., including Mayor Eric Garcetti’s A Bridge Home program, to provide free and reduced-price rides, establish electric charging stations and increase the number of bicycles and scooters in underserved neighborhoods. Local advisory councils formed by Lyft will be established to guide the City Works initiative.
The $5 million would be a drop in the bucket compared to the existing city budget. Major infrastructure projects in Los Angeles cost billions, and the Los Angeles County Metropolitan Transportation Authority’s 2018 budget was more than $6.6 billion. And Lyft’s new initiative comes at a time when L.A. transportation officials are considering levying a tax on companies like Uber and Lyft, both to raise more public funds to offset the traffic and infrastructure wear and tear caused by the companies and to nudge riders towards using Metro’s more affordable transit options.
“Anytime a private company wants to help build public infrastructure, you have to welcome that and embrace that,” said Joshua Schank, chief innovation officer at Metro and the lead behind the agency’s research into taxing the ride-hailing companies. “But I don’t think that should allow us to take our eye off the ball, which is that there’s a serious mobility problem in Los Angeles and voters have entrusted us to solve it, and part of solving it will be coming up with a set of regulations for private TNCs [Transportation Network Company].”
Metro has only rough estimates of how much a tax on Uber and Lyft rides could bring in — the companies don’t share detailed ride data with local officials — but those range from $400 million (with a 20-cent fee per trip) and $5.5 billion (at $2.75 per trip) over 10 years.
Lyft also announced it would help fund reforestation efforts in California after last year’s Woolsey fire devastated Malibu and nearby parts of Ventura and Los Angeles counties.
All eyes were on Lyft on Friday morning as investors rushed to get a piece of the first big U.S. technology listing of the year. The stock’s early performance served as a litmus test for public market investors and their appetite for money-losing tech companies.
This month, Lyft disclosed in its IPO filing with the Securities and Exchange Commission that it lost $911 million on revenue of $2.2 billion in 2018. That compared with a loss of $688 million on revenue of $1.1 billion the previous year.
Investors didn’t seem to mind that the company was losing money. Last week, after just two days of marketing to investors, Lyft’s listing was oversubscribed. By Friday, Lyft ended up selling more shares than planned at the top of an already elevated price range.
The lead bankers for the offering — JPMorgan Chase & Co., Credit Suisse Group and Jefferies Financial Group Inc. — presented over nine days to more than 600 investors, according to a person familiar with the matter who asked not to be identified because the meetings were private.
In all, more than two dozen banks were listed in the company’s filing as participating in the offering. JPMorgan is serving as the stabilizing agent, giving it a chance to earn additional fees by ensuring the first day of trading goes smoothly with limited stock-price fluctuations.
Of the 22 tech and internet companies that have raised $1 billion or more in U.S. IPOs, Lyft ranks seventh at $2.34 billion. That was just behind last year’s $2.42-billion listing by the Chinese video service iQIYI Inc. and ahead of Twitter Inc.’s $2.09-billion offering in 2013.
Alibaba Group Holding Ltd. tops the list at $25 billion in 2014 — the largest-ever U.S. IPO — followed by Facebook’s $16-billion listing in 2012.
The 21% opening pop over Lyft’s offer price of $72 ranks Lyft as the sixth-best of that group at the opening price.
Attention-grabbing tech listings often soar on their first day of trading. Snap Inc. closed its first day of trading up 44% in 2017, while Alibaba finished its debut up 38%. Snap now trades at less than two-thirds of its listing price; Alibaba has almost tripled its market value.
Lyft’s offering fulfilled a key strategic goal for the ride-hailing company: beating larger rival Uber to the market. Uber is expected to publicly file for its offering in April, kicking off a listing that could make Uber worth as much as $120 billion, people familiar with the matter have said.
The company’s appeal to investors hinged on the potential for ride-hailing to replace car ownership. Zimmer likened the displacement of car ownership to cable television cord cutters.
“This massive market shift — just like entertainment has gone streaming — is happening with car ownership,” he said. “We’re going after a trillion-dollar market opportunity.”