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Lyft shares not getting any lift as prices plunge 22% since IPO

As of the latest closing price on Monday, April 15, Lyft’s stock has fallen 22% from its initial public offering price of US$72, and now trades at US$56.11.

Barely half a month has passed since ride-hailing tech firm Lyft debuted on tech-rich Nasdaq, and things aren’t looking up.

As of the latest closing price on Monday, April 15, Lyft’s stock has fallen 22% from its initial public offering (IPO) price of US$72, and now trades at US$56.11. Punters drove the stock’s value even lower on the first trading day of this week, causing Lyft’s shares to slide 6.32%, or US$3.78 for the day’s session.

Lyft’s IPO was priced on the top end of its IPO price range last month, which assigned it a valuation of US$24 billion in an offering that raised US$2.34 billion. However, concerns from investors on the start-up’s profitability have caused the stock to trade poorly since it debuted on March 29.

Investors are having doubts on whether if Lyft can briskly expand its market share and be profitable. In addition, its rival Uber is launching its IPO soon, so investors can now choose another ride-sharing stock to bet on rather than staying with Lyft.

Punters prowling over Lyft

Short-sellers have also swarmed in to take advantage of the situation. Financial analytics firm S3 Partners’ data showed that there has been active short selling in Lyft’s shares, with a massive 75% of the free float held short, Bloomberg reported.

On Sunday, the ride-hailing firm said it is pulling out thousands of electric bikes from service in its bike-sharing program in three American cities - New York, Washington, and San Francisco - on claims of a braking problem, further driving its value down in this price-sensitive period.

Lyft has so far ended more trading days in the red than in the green since its debut. With Uber’s entrance into the United States (US) stock market just weeks away, experts are concerned that Uber’s appearance would further deteriorate Lyft’s stock value.

Uber not giving a Lyft

Last week, Uber officially filed for IPO with the US Securities and Exchange Commission. The stock is expected to be listed on the New York Stock Exchange in May. Uber is expected to seek a valuation of US$90 billion to US$100 billion, and plans to sell around US$10 billion worth of stock.

Uber is likely to kick start its roadshow, to present to investors on the week of April 29, according to Reuters.

In its regulatory filing, Uber said it has 91 million average monthly active users on its platforms, including for ride-hailing and its food delivery business Uber Eats, as of the end of 2018. But the ride-hailing giant said that growth for its business is slowing, as it expects ‘operating expenses to increase significantly’ in the foreseeable future, and that it ‘may not achieve profitability’.

Uber’s user size is almost five times that of Lyft’s which has 18.6 million users.

An advantage Uber has over Lyft would be in its market share as it is the largest player in many of the markets in which it operates. Analysts consider building scale a crucial factor for a business model like Uber's in order for it to become profitable.

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.

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