Lyft’s shares fell below their listing price on Monday as investors cashed out after Friday’s bumper debut and questions arose over the group’s route to profitability.
Shares in the US car-booking app fell as much as 11.7 per cent to $69.12 in morning trading — leaving them 4 per cent below the listing price of $72. The shares climbed to an $88 high on Friday before ending the session 9 per cent above the listing at $78.29, for a market capitalisation of $22.4bn.
“It’s a mini car crash,” Dan Ives, an analyst for Wedbush Securities, said on Monday. “For a tech IPO like this to trade below its list price on its second day is not ideal.”
Technology IPOs often fall after the first day of trading. Shares in Facebook, Twitter and Alibaba all lost value in second-day trading. In Facebook’s case, the stock dropped 10.6 per cent on the day after its debut.
“Obviously you’d like to see it hold at the price it went public at but it’s not surprising you see some of the faster money exit after the pop you got on day one,” said Thomas White, an analyst with DA Davidson.
IPOs that attract retail investors, such as Lyft, can lead to more volatile trading, complicating the job for banks acting as “stabilisation agents”, said Nick Colas, co-founder of DataTrek Research. “Retail investors trade in smaller size. With institutional investors it’s more transparent.”
JPMorgan, the stabilisation agent for Lyft’s listing, declined to comment.
Mr Ives pointed to more fundamental questions about Lyft’s ability to deliver a profit as a potential driver for investors to shed the stock. Lyft doubled its revenue last year to $2.16bn but has spent heavily, with losses jumping 30 per cent to $911m in 2018.
“Investors are still getting their arms around the valuation and trying to determine the general prospect of profitability for Lyft. That’s the big issue — there is no clear path to profitability,” he said.
The Monday sell-off casts a shadow over the listing of Uber, Lyft’s larger rival, which is seeking a valuation topping $100bn, probably later this year.
Mr White said the two companies had different profiles despite operating in the same industry. Uber, for instance, offers investors broader geographic exposure.
“The bigger consideration for the other big IPOs is the broader backdrop of the market and not what happens to Lyft. They are both ride-sharing companies but they’re different businesses,” Mr White said.
Other analysts are more bullish on Lyft’s potential to drive a profit. Ali Mogharabi, an analyst with Morningstar, said the company could become profitable by 2022 by cutting costs on technology and marketing spending.
“As they keep attracting riders, more drivers will come on to the platform — we think that will reduce money spent on marketing,” Mr Mogharabi said.