How Lyft's Reception Could Mean Trouble For The IPO Market

Apr. 02, 2019 8:28 AM ETPINS, WORK, UBER, MNTV, BABA, LYFT7 Comments

Summary

  • Lyft's relatively poor performance following market open could be a sign retail investors may not be keen on the upcoming deca-unicorn IPOs.
  • Reasons from misunderstanding of valuation metrics to comments from Warren Buffett could be to blame.
  • The next few offerings and the performance of Lyft going into quarter 1 earnings, could have significant ramifications on the year's massive IPO market.

Silicon Valley Invades Wall Street

IPOs expected for 2019- the year of the deca unicornSource: Yahoo! Finance

2019 is expected to one of the biggest years for IPOs in recent history with the expected debut of some of the most valuable and most sought after Silicon Valley favorites including Pinterest (PINS), Slack (SLACK), and Uber (UBER). Many of these tech and internet giants have become so large that term unicorn (billion dollars + private company) was deemed too insignificant and the new term "deca-unicorn" has been coined to better describe them. This expected parade of deca-unicorns began on the last trading day of Q1 2019 with the IPO of the rideshare company Lyft (LYFT). Despite heavy publicity and anticipation, the company failed to lift off following its opening trade. Given this offering's status as the first man on the ground in Silicon Valley's invasion of Wall Street, speculation has begun on what this could mean for the IPO market and the upcoming listings.

Lyft Underwhelms

Lyft share price performance on day one of IPOSource: Yahoo! Finance

On Friday, March 29th, 2019 the San Francisco based rideshare company, Lyft debuted on the Nasdaq kicking off the wave of Silicon Valley deca-unicorns. After becoming oversubscribed during the first two days of its roadshow, both the hype and expectations for the stock were astronomical. This lead many, myself included, to speculate that this could price above the $62-$68 dollar range, and before long this became a reality when the range was revised up to $70-72 per share. Finally on Thursday, March 28th, 2019 it was announced that the IPO would be priced at high-end of its guided range at $72. To many, this offering would be a meaningful showing of how Wall Street and the average investor take to the Silicon Valley exclusive growth machines, and while Wall Street clearly ate the offering up, it does not appear the average investor was as keen.

This article was written by

*Currently inactive but may return in the future*Started my career on the Street doing lock-up trading at BAML, proceeded to work as a research analyst for a small asset manager with long-only fund, and worked as an investor relations consultant  for over a dozen public companies.I have helped high-profile pre-IPO investors exit volatile concentrated positions, written research used by professional investors to make trading decision, vetted bankers for capital raises and the de-SPAC process, participated in discussions between legendary investors and executives at corporate issuers, and helped corporate issuers obtain coverage from Wall Street analysts. I know what makes capital markets tick and how the sausage is made.My work on Seeking Alpha does not constitute financial advise or an investment recommendation and my conclusions might not be aligned with yours or your financial goals.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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