Lyft valuation set at $24.3 billion

Lyft's initial public offering opened strongly on Friday, underscoring investor interest in the money-losing ride-haling company and a willingness to accept the risk of the unproven business model.

The stock opened at $87.24 a share on Nasdaq, rose to $88.60 and closed at $78.29, a gain of 8.74 percent from the offering price of $72. Volume was 30,571,976 million shares.

"The hot money got out," John E. Fitzgibbon, Jr, editor of IPOscoop.com, told China Daily. "Investors are waiting for the next bag of tricks to come along. Lyft established interest in the ride-hailing sector and the smart money will probably focus on Uber."

Uber, a much larger ride-hailing company with operations worldwide, has not yet filed to go public. Its IPO, expected later this spring on the New York Stock Exchange, may be the stronger of the two despite larger losses.

The IPO valued Lyft at about $24.3 billion. The company priced 30.7 million Class A shares on Thursday at $72 each. It increased the price range to $70 to $72 a share, up from the originally filed range of $62 to $68 a share. The increase showed strong interest in the deal. The ticker symbol is LYFT.

Lyft plans to use cash raised in the deal for working capital, operating expenses and capital expenses. About 5 percent of the shares have been set aside for the company's directors, selected employees, family members of directors and drivers who serve, or have served, on the Driver Advisory Council.

The over-allotment option, or additional shares to be offered to investors if demand exceeds the original offering, is 4.6 million shares. The company plans to convert 219.2 million preferred shares to Class A shares prior to closing the deal. This could eventually drive down the value of shares offered in the IPO.

Lyft's revenue grew to $2.2 billion for the year ended Dec 31, 2018, from $1.1 billion for 2017 and $343.3 million in 2016. Last December, Lyft had a total deficit of $3.6 billion and losses have continued to grow. However, the company's heavy spending has paid off: Lyft's North American market share increased from 22 percent to 39 percent in the last two years, the company said in its registration statement filed with the Securities and Exchange Commission.

For the quarters ending March 31, 2016, to Dec 31, 2018, the number of rides provided by Lyft has increased from 29 million to 178.4 million and the revenue per rider has grown from $15.88 to $36.04. Lyft keeps about 20 percent of each fare, the company said.

But Lyft warns, "Our limited operating history and evolving business make it difficult to evaluate our future prospects and the risks and challenges we may encounter."

Lyft and Uber are similar companies with different business plans. Lyft is focused on North America and reportedly is growing faster. Uber has used its strong brand to expand into food delivery and bicycle sharing. Uber is strong is Australia and New Zealand, but sold its operation in China to Didi Chuxing, to Yandex in Russia and to Grab in Southeast Asia. Anti-trust concerns ended prior merger talks between Lyft and Uber.

Uber has announced that it will acquire Middle Eastern rival Careem Networks for $3.1 billion, ending sharp competition and expanding its presence in a region of about 400 million people. The takeover of Dubai-based Careem is Urber's largest acquisition.