As everyone and their momma's know, LYFT will be going public this Friday. By all accounts, there's no doubt this IPO is the hottest probably since Alibaba. This is an IPO where even the common person who doesn't care about the markets knows in advance and even sets some money aside to participate on opening day. However, as most experienced traders & investors know, any shares exchanging hands after this thing has gone public just won't have the same edge & value as before the IPO. Once LYFT is fully priced, it's going to be fully priced- meaning there likely won't be much upwards momentum to look for. And for good reason! Private equity companies have been pouring money into LYFT for years, most with the exit strategy of IPO... and finally the day has come to finally cash out and cash out big.
Companies like GSVC, who bought LYFT years ago when it was at a much much cheaper valuation than to what it will be Friday will be the real winners. Volume in GSVC has been picking up as well as of late, signaling investors who want to participate in the IPO are looking at other avenues for getting in. The 1-month chart for LYFT affiliates DCAR, HYRE & GSVC will show you just that. However, in my view- GSVC is the lowest risk, highest reward setup for playing LYFT. Why? Well for beginners, GSVC actually turned a profit last year, unlike DCAR & HYRE. Further, GSVC is well diversified into other names like Spotify, Coursera & Dropbox. So how do you make money?
The Trade: Long GSVC. If LYFT pops a good 20% (or more hopefully) above its IPO price- there's no reason for GSVC not to have a good 5%-10% move upwards or even more. As discussed previously, GSVC got into LYFT early when it was at, let's just say, for example, $30 a share. If LYFT IPO's at it's expected $60 range, GSVC already has a 100% return on it's investment. But as we all know, IPO's like LYFT tend to pop open much much higher than the IPO price meaning GSVC would have a 100%+ winner on its books. And with that, investors and traders will be hitting the buy button, hitting the ask and of course, driving the stock price higher. With the last reported NAV per share in December reported at $9.89, this just strengthens the bull case and justifies to portfolio managers they are getting a great value play. If we were still in the old trading pit days, I just couldn't imagine many sellers stepping in to sell GSVC pit when there are only positive catalysts. To be clear, as great as GSVC's portfolio may be - the trade (to me at least) is only as good as till Friday or Monday if we get some continuation. In short, I think LYFT will pop well above its IPO price. An IPO price that us common folk, who aren't institutional clients, just won't have the access to. I certainly don't want to step into the LYFT pit and compete on buying a name that's already up 20%+ above its IPO price... I'd rather be in the name that acquired those shares for much cheaper years ago and is now selling them to everyone else who is late to the party.
Disclosure: I am/we are long GSVC.