Lyft IPO – too early to form judgements?
The first day pop in Lyft attracted much comment, but the drop from its initial high should not get in the way of a positive longer-term story.
Lyft IPO: look beyond the first day
The Lyft initial public offering (IPO) was barely a week ago and already investors are queuing up to declare that it has been a complete failure.
The negativity surrounding a new stock is probably unavoidable in this era of social media and lightning fast ‘quick takes’. After an initial pop, the shares dropped back, although they have already recovered much of the lost ground, rising from $67.00 to $72.00 by the end of the week.
It would be silly to judge a company by the size of the bounce seen in the first day of trading. Facebook's IPO was marred by technical glitches and the stock ended the day only a fraction higher than the IPO price (at $38.23, from an initial price of $38.00). Things got worse from there, with the stock falling almost 60% before a steady recovery since then that has seen the price gain 900%.
Lyft shorters could face 'short squeeze'
While Lyft might not reach these dizzy heights in such a short space of time, it has not exactly slumped, and even if it did it might not suggest that the IPO was a complete flop. It has a tough time ahead of it, as losses for 2018 rose 32% from a year earlier, while it has to fight it out with Uber, a major competitor in the ride-sharing space. Facebook had no rivals, or at least none of comparable size, but Lyft and Uber are very closely-matched.
In a warning for those looking to short the stock, the number of shares out for shorting had risen to 12.4 million, or 38% of the total float. Such a large number presents the potential for a ‘short squeeze’ if the price begins to rise appreciably. A good set of numbers from Lyft in its next quarterly update could spark just such an event.
Longer-term, the firm has plenty of potential. Car ownership looks to be a declining proposition, especially among the younger generation, and while others (such as car firms) will look to move into the field, the potential growth is huge. Lyft has to prove itself, but the first week of trading is a poor metric by which to judge a company.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
