Wealth Advisor Rockville, MD
In its second day of trading on the public market, shares of Lyft stock fell as much as 11 percent, sinking below the stock’s initial public offering price of $72 in an oversubscribed offering, which some have said is not a favorable beginning for the company.
Just after market open on April 1, Lyft stock traded as low as $69.12, which is more than 20 percent below its intraday high of $88.60 on March 29. By 10 a.m. ET, more than 16 million shares had been traded.
On its opening day, the stock jumped up as much as 23 percent. It eventually settled to a 9 percent gain and had a market cap of about $22 billion. On day two, Lyft’s market cap was about $19.8 billion, reports CNBC.
Lyft’s drop will be a reality check for Lyft investors, as well as other tech giants Uber, Slack and Pinterest, who are planning on going public this year.
In a statement, Wedbush managing director Dan Ives told CNBC, “Falling below its IPO price is a gut punch for investors and Lyft, This is a pivotal few weeks of trading ahead to gauge Street demand for the name as valuation and profitability continue to be the wild cards for tech investors.”
CNBC also reported that Lyft’s 2018 loss of more than $900 million in regulatory filings ahead of its IPO (the largest ever loss reported for a company going public) is partially why the stock carries “too many big assumptions” for success, according to analysts at Guggenheim.
Meanwhile, Pinterest had a 2018 net loss of $63 million, but Slack and Uber have filed to go public confidentially, and haven’t publicly report audited financials.
D.A. Davidson analyst Tom White wrote a note in his Buy rating of Lyft, initiating Lyft at a $75 price target while cautioning investors who expect Lyft to be profitable in the short-term, reports Yahoo Finance.
“Meaningfully reducing its use of driver/rider incentives may prove difficult in the near-term for Lyft, given that the U.S. is arguably the most competitive large ride-sharing market in the world,” White wrote. “Along with the years of losses, the path to profitability is highly unclear.”
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