Lyft to file for IPO, but should you buy?
There is a lot of excitement building over Lyft and a slew of other so-called unicorns and private tech companies valued at $1billion going public this year.
Lyft says it could file for its initial public offering (IPO) as soon as this week. It’s a big name that could make a big splash when it debuts.
But should you be chasing Lyft or any of the other unicorns on the first day of trading?
Ray Wang, Constellation Research analyst and founder, says there are a couple of factors to consider before you invest in Lyft after it goes public.
“One is the time frame of your investing, and the second is the type of IPO this is,” he said during an interview on FOX Business’ “Making Money with Charles Payne” on Monday.
It’s easy to forget the Facebook fiasco when the company hiked its IPO’s price and share allocation into its May 18, 2012 debut. The stock, priced at $38.00, rallied to $45.00 a share before closing at $38.23.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| FB | NO DATA AVAILABLE | - | - | - |
| SNAP | SNAP INC. | 11.41 | +0.78 | +7.28% |
| APRN | NO DATA AVAILABLE | - | - | - |
From there it was a downhill ride for the stock and exactly five months later, shares were changing hands at less than $19.00 a share. The stock hit bottom and went on a tear peaking at $210 a share last June.
In 2017, Snap was the most anticipated and largest tech IPO since Alibaba. The stock rallied 44% higher on the first day of trading. Shares of Snap shifted into freefall dropping from $27.00 a share to $4.82 recently.
But possibly the worst unicorn of 2017 was Blue Apron which opened for trading at $19.25 and now trades at less than $1.50.
Lyft has had 19 rounds of financing going back to 2007. Revenue climbed to $909 million as losses increased to $373 million in the first half of 2018.
Wang said investor should also consider whether Lyft is going to grow beyond where it is today.
“In the case of Lyft, this is what we call a data driven digital duopoly. There’s only a few of these that are going to pop up for ride sharing in the U.S, so it’s a question of if you believe in the ride-sharing market, do you think we’re going to get to 6 billion rides by 2020 and do you think Lyft is going to be one of the players?,” he said.
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Last year was slightly better but still mixed for unicorn stocks as the most anticipated names Spotify, Bloom Energy and Dropbox are all trading lower than the first print when the public first got a bite.