- 5 Things To Know About The 0 Billion Of Tech IPOs Coming To Market
- 1) IPO performance is an important risk-on, risk-off indicator for the stocks
- 2) Since 2016, performance of tech companies after IPO is a mixed bag with Software leading
- 20 largest tech IPOs over the past 3 years
- 3) IPO offerings have slowed since 2014 before an expected pickup in 2019
- 4) The rush to IPO is probably related to the presidential election in 2020 and recent economic weakness
- 5) Large tech IPOs in the pipeline have a combined private market value of 0 billion
- Large Tech unicorns expected to IPO in the next year
- Lyft IPO: 5 things to know about the ride-hailing company ahead of its IPO
- The revenue is nothing but net
- On a promo spree
- Another dual-class listing
- On a mission
- Lyft Stock Is Surging Above Its IPO Price. Here’s What You Need to Know
- When does Lyft stock go public?
- How much will Lyft stock cost?
- What is Lyft’s market capitalization?
- How does Lyft compare to Uber?
- Should I buy Lyft stock?
- What next for Lyft after the IPO?
- Rocket, Oscar Health, Marvell and Lyft – 5 Things You Must Know Wednesday
- 1. — Stock Futures Point to a Wall Street Rebound
- 2. — Wednesday's Calendar: Marvell Earnings, ADP Employment Report
- 3. — Rocket Drops After Tuesday's Surge
- 4. — Oscar Health Raises
.4 Billion in IPO
- 5. — Lyft Has Its Best Week Since Last March
5 Things To Know About The $250 Billion Of Tech IPOs Coming To Market
This year is setting up to be a blockbuster for IPOs particularly in the tech space. Over the past several weeks large companies such as Slack and Uber have voiced their intention to IPO. Others are even further along in the process.
Lyft filed an S-1 on March 1 with details about its finances and even a ticker picked out (LYFT). In total, companies with about $250 billion of market cap are planning to IPO this year.
With that, here are five things to keep in mind related to the IPO market.
1) IPO performance is an important risk-on, risk-off indicator for the stocks
The IPO market tells investors a lot about the risk environment the notional amount sold through IPOs, and how the shares trade after. A robust IPO market signals high liquidity and enthusiastic demand to invest in risky new shares. A muted IPO market suggests risk appetite is suppressed.
Over the past 3 years, IPO shares have generally outperformed the S&P 500. In 2006 – mid 2018, the amount of IPOs steadily increased and new shares outperformed the market. To track the performance post the offering, the IPO ETF is a good barometer.
The ETF tracks the rules based Renaissance IPO Index, which adds sizeable new companies on a fast entry basis and the rest upon scheduled quarterly reviews. Companies that have been public for two years are removed at the next quarterly review.
In July 2018, the IPO ETF peaked vs. the market and started underperforming. This was a harbinger of the market sell-off which started in October. The IPO ETF bottomed relative to the market at the end of December, and has rallied since.
2) Since 2016, performance of tech companies after IPO is a mixed bag with Software leading
Focusing on the tech sector, the largest IPOs over the past 3 years are a mixed bag. Some companies such as Docusign (+91.6% since IPO), Ceridian (+116%) and Pluralsight (+120%) have done very well.
All three are in the software space. Others GreenSky (-51%), Sogou (-53%) and Trivago (-52%) have disappointed investors since their IPO.
The biggest IPO in recent memory, Snap is down 42% since its debut 2 years ago.
20 largest tech IPOs over the past 3 years
Smaller IPOs particularly in the SAAS sector have fared much better. For example, Okta (OKTA) went public on April 6, 2017 at $17 per share. Even buying the stock after its first day pop has produced a 230% return. However, not all SAAS IPOs have done well as Dropbox (DBX) is down 22% since its first day of trading
3) IPO offerings have slowed since 2014 before an expected pickup in 2019
The notional value of US IPOs was about $20B and declined through the end of 2015 as investors waited for the US election for clarity. After the presidential election in 4Q2016, the amount increased steadily to $15b per quarter in the middle of 2018. Since then, the offering amount per quarter has declined back to $5b per quarter.
4) The rush to IPO is probably related to the presidential election in 2020 and recent economic weakness
From a company’s perspective, deciding whether to IPO depends on many variables. However, the recent rush to IPO in 2019 is probably related to 2 macro factors.
First, the presidential election in 2020 will ly cause uncertainty similar to 2016 when the IPO market took a pause. Second, recent economic slowdown has increased the odds of a recession in late 2019 or 2020.
Private companies want to get ahead of any recession when the IPO market will undoubtedly cool.
5) Large tech IPOs in the pipeline have a combined private market value of $250 billion
The details of upcoming IPOs have only recently started to trickle in and most companies have not released any detailed filings about size or valuation. The combined private market value of the largest tech IPOs is $250b. Assuming that 20% of the market cap will be floated in an IPO suggests about $50b of notional offerings in the next 12 months in the tech sector.
Large Tech unicorns expected to IPO in the next year
|Company||Valuation||Expected IPO Date||Industry|
|Palantir||$36-41b||2H19 – 1H20||Big data|
|Rackspace||$10b||2019||Cloud / Hosting|
|Robinhood||$5.6b||2019||Stock & crypto trading|
The implications for the stock market depends on several factors. All else equal, IPOs are negative for the overall market because it increases the supply of overall equity. Investors need to sell other stocks in order to buy an IPO (unless there’s idle cash). However if IPOs are well received by investors and trade strongly after, this would indicate a bullish market with robust liquidity. This was the type of market in the late 90’s.
Below is the company summary of the largest tech unicorns and the financial details known today.
Uber & Lyft – Lyft’s IPO roadshow is planned for mid-March 2019. In comparisons between Lyft and ride-sharing competitor Uber, some have called Lyft “cheap”, citing Lyft’s valuation is rumored to be
Lyft IPO: 5 things to know about the ride-hailing company ahead of its IPO
Lyft Inc. has beat rival Uber Technologies Inc. to an initial public offering, and that’s important for a number of reasons.
The first is that Lyft LYFT, +2.23% is getting to set the narrative heading into the IPO process, which is crucial given that the company is smaller, more narrowly focused, and less well-known than Uber.
Lyft removes an element of pricing uncertainty around the listing by going first, experts say.
The company could kick off a roster of decacorns, or companies privately valued at upward of $10 billion, that are expected to go public in the year ahead.
Stampede of the ‘decacorns’: Here are the big-name startups preparing for 2019 IPOs
The company’s prospectus shows that Lyft plans to report revenue on a net basis, excluding the money paid to drivers. Uber — which previously detailed a similar approach to MarketWatch — will be hard-pressed to break the mold and report gross revenue, given that the businesses are the same and share PricewaterhouseCoopers as an external auditor, something unusual for fierce competitors.
See also: Meet the ‘O.G.’ Uber and Lyft drivers who could cash in on the IPOs
Lyft shares have been approved to list on the Nasdaq under the ticker “LYFT,” and are expected to do so Friday morning.
Thursday afternoon, Lyft priced at $72 a share, at the top of its range, which it had raised Wednesday evening to a range of $70 to $72 a share after previously projecting a price between $62 and $68 a share. Lyft plans to sell 30.77 million class A shares, which would raise more than $2.
2 billion at the top of the revised range with an initial valuation around $24 billion. That total could increase if underwriters exercise all the options to buy an additional 4.62 million shares.
Here’s what you need to know about the company ahead of its IPO.
The revenue is nothing but net
The company recognizes revenue on a net basis, meaning that the company’s top-line number is significantly less than the sum total of what all riders paid over the course of a given period.
Lyft is able to report revenue on a net basis, rather than a gross basis, because it considers itself an “agent” in the process of connecting drivers and riders.
The company argues that it merely helps third parties provide transportation services to riders and that both riders and drivers have the ability to reject a transaction price.
Opinion: How a new crop of tech IPOs may steal sentiment from FAANG stocks
Uber is expected to make a similar choice as far as how it reports revenue, which has drawn criticism from accounting experts who argue that ride-hailing companies would be doing a disservice to investors by not reporting a fuller metric and giving investors a sense of what they pay their drivers. Both companies could also choose to report that metric under another name, as Lyft did with its bookings offering.
Lyft doubled its net revenue in 2018, but that was a decelerating growth rate from a year earlier. The ride-hailing company posted revenue of $2.2 billion last year, up from $1.
1 billion in 2017 and $343 million in 2016.
The company’s losses are getting steeper as revenue grows: Lyft generated a net loss of $911 million in 2018, compared with losses of $687 million and $683 million in 2017 and 2016, respectively.
The company’s bookings, which represent the total dollar value of transportation spending through Lyft services, climbed to $8.1 billion from $4.6 billion in 2017 and $1.9 billion in 2016. Lyft’s net revenue represented 27% of the company’s bookings in the latest period.
The company gives the example of a $24 ride-hailing charge, which includes a $4 tip and a $3 airport fee: Bookings would be $17 in this example, Lyft said.
Revenue would presumably be $4 or $5 in that example the disclosure about what percentage of bookings go to revenue, though Lyft did not provide that figure in the example.
Lyft is mainly focused on the U.S. market, though it launched a Canadian business in 2017. The company provides scooter-sharing and bike-sharing services as well.
On a promo spree
In what seems a fairly obvious bid to gain market share ahead of its expected listing, Lyft has been heaping discounts on riders in recent weeks.
One offers 50% off 10 rides until mid-March, though it caps the savings at $6 per ride.
Ride-hailing companies are already known for offering cheaper rides than can be found through traditional taxi services, and Lyft’s aggressive discounting ahead of the IPO plunges the company deeper into a price war with rival Uber.
See also: Is a taxi or Uber driver more ly to rip you off on the way to the airport?
“We believe that much of the growth in our rider base and the number of drivers on our platform is attributable to our paid marketing initiatives,” Lyft said in the risk-factors section of its prospectus.
Growing brand awareness with both riders and drivers “can be costly,” the company contended. Lyft said its U.S.
ride-hailing market share climbed to 39% in December, up from 22% a year earlier, third-party estimates from Rakuten Intelligence.
The company discussed other pricing risks as well in its filing. One involves the company’s shared-ride product, which offers users a lower fare if they agree to share a car with someone else going along a similar route. If Lyft fails to adequately match riders or determine an appropriate fare for drivers in the case of shared rides, the company warns that its financials could be impacted.
Another dual-class listing
Lyft, many other hot tech companies to test the public waters, plans to concentrate voting power with founders Logan Green and John Zimmer, though the company hasn’t yet said what concentration each co-founder will have. Green, currently the chief executive, and Zimmer, Lyft’s president, each own 1,180,329 shares of Lyft’s class A shares, about 0.05% of the 240,597,591 shares currently outstanding, but are expected to have voting control.
Lyft will have 271.37 million class A shares outstanding and 12.78 million Class B shares outstanding. Class A shares will have one vote and Class B shares, which are convertible to class A shares at any time, will have 20 votes.
After the IPO, Green will have 29.3% of the voting power and Zimmer will have 19.5% of the voting power.
Dual-class structures haven’t deterred investors on the whole, though they’ve drawn sharp criticism as they make it nearly impossible for shareholders to question management’s judgment.
Don’t miss: Founder-control stock structures aren’t going anywhere
“Given the growing focus on corporate governance issues in general, and the negative commentary on the absolute voting majority that the startup founders prefer to hold, we believe tone-deaf is the right characterization for any company still planning to go ahead with the structure, Lyft included,” wrote Santosh Rao, head of research at Manhattan Venture Partners.
Other Lyft stakeholders include early investors including venture-capital firm Andreessen Horowitz, and investment entities associated with Rakuten Inc. RKUNY, -1.57% , General Motors Co. GM, +0.28% , Fidelity and Alphabet Inc. GOOGL, -0.11% GOOG, -0.14% , all of which own at least 5% of the pre-IPO shares.
On a mission
It’s a virtual requirement for tech companies considering IPOs to have corny mission statements. Lyft’s is to “improve people’s lives with the world’s best transportation.
” The company stresses its culture often in the prospectus, highlighting its values of “Be Yourself,” “Uplift Others,” and “Make it Happen.
” Corporate-speak to be sure, but there is probably something to Lyft’s culture: Amid sexual-harassment and other scandals at Uber, some riders flocked to Lyft and didn’t turn back.
Lyft Stock Is Surging Above Its IPO Price. Here’s What You Need to Know
Ride-hailing company Lyft began trading on the Nasdaq on Friday morning, after the company completed its initial public offering process by pricing the stock on Thursday night. It’s one of the first in a wave of “unicorns”—private companies valued at more than $1 billion dollars—expected to go public this year, including Uber, Airbnb, Pinterest, and Slack.
The company raised $2.7 billion by selling stock for $72 per share. But, as often happens with much-hyped IPOs, investor demand quickly pushed the share price to $87, 20% above the offering price.
Here’s what investors need to know.
When does Lyft stock go public?
U.S. stock markets open at 9:30 a.m., and Lyft stock (LYFT) began trading a couple hours after that.
That’s because when a stock is traded for the first time on public markets, it can take a little time to balance the order book. There will be a wider than normal spread between the price investors want to pay to own Lyft stock, and what investors who already received shares will be willing to sell for.
How much will Lyft stock cost?
The bankers handling Lyft’s IPO priced the stock at $72 per share late Thursday. But Lyft stock opened significantly higher than that, at $87 per share.
“Technology investors are salivating to get into the transformation market,” Wedbush analyst Dan Ives said in an interview. “Ride-share is a generational opportunity—there is urbanization, changing consumer habits. Growth investors have to be in the space,”
What is Lyft’s market capitalization?
Valuing a high-growth company with large losses is difficult. The traditional price-to-earnings ratio doesn’t work, because it has losses, not earnings. The company is raising $2.2 billion by selling stock for $72 per share. At that price, the company would have a market value of $24.3 billion.
Ives is one of the few Wall Street analysts already covering Lyft, initiating coverage Thursday with a Neutral rating and a 12-month price target of $80.
He said he used four times enterprise value (the total value of the company) to estimated 2020 sales in reaching that price target, before the final IPO pricing was set later Thursday.
He noted that “software as a service” companies Microsoft (MSFT) trade for three to eight times enterprise value to estimated 2020 sales.
Read more: Investors Should Steer Clear When Lyft Goes Public
Clearly, traditional car investors aren’t the target for Lyft’s IPO. Ives sees a distinct split between how technology investors and value investors—who look for cheaper stocks that the market may be undervaluing—see the stock. “Traditional car investors have to take heart medication when they look at Lyft’s valuation,” he said.
A similar investor dynamic is present in Tesla stock (TSLA), too.
New Street Research technology analyst Pierre Ferragu, for example, rates Tesla stock a Buy, with a $530 target price, the highest on Wall Street.
Goldman Sachs auto analyst David Tamberrino, on the other hand, rates Telsa stock a Sell, with a $210 price target (it closed Thursday at about $278 per share).
How does Lyft compare to Uber?
Uber Technologies, Lyft’s chief competitor, Lyft’s chief competitor, is larger but remains private. It has an estimated private market value of about $110 billion. Uber has not yet filed for its IPO, but is expected to go public not long after Lyft does.
Lyft is primarily focused on the U.S. market, while Uber is investing all around the world. Earlier this week Uber bought United Arab Emirates ride-haling company Careem for more than $3 billion.
Both companies are trying to disrupt traditional car ownership. Investors will be more focused on the growth of the overall market than on competition between the two. At least for now.
Should I buy Lyft stock?
Probably not—at least not on Friday. Barron’s Andrew Bary recently wrote that investors should skip the mania of the IPO and wait to see if Lyft has a clear path to profitability.
Investors who do want a piece of the action would be well advised to use “limit orders.” That means specifying a price to pay for the stock. It will require closely monitoring trading, but a “market order”—where price to pay isn’t specifically selected—can leave investors with strange outcomes on the first day of trading.
What next for Lyft after the IPO?
“The path to profitability will be a big question for Lyft investors,” Ives said. But he’s not expecting profits for years to come. Lyft will ly need fully autonomous cars to achieve long term profitability, Ives said. That means investors will want to see some benefits of scale—smaller losses as sales grow.
But the ultimate success of the industry will be dependent on technological innovation beyond Lyft’s control.
“Lyft made a strategic decision to not invest as much in autonomous driving technology as Waymo and Uber,” Ives said. Lyft has partnerships with auto suppliers Aptiv (APTV), but it seems to be relying on the existing car industry to solve the autonomous driving equation.
Write to Al Root at firstname.lastname@example.org
Rocket, Oscar Health, Marvell and Lyft – 5 Things You Must Know Wednesday
Here are five things you must know for Wednesday, March 3:
1. — Stock Futures Point to a Wall Street Rebound
Stock futures pointed to a rebound for Wall Street on Wednesday, with tech stocks, which have faced questions about valuations, leading the gains.
Contracts linked to the Dow Jones Industrial Average rose 219 points, S&P 500 futures gained 24 points and Nasdaq futures were up 95 points.
With fears of higher interest rates front and center, investors have been questioning how much they're willing to pay for equities, particularly high-flying tech stocks.
Despite the bond market stabilizing following a surge in Treasury yields last week, Wall Street remains concerned about longer-term borrowing costs.
Benchmark Treasury yields traded at 1.446% on Wednesday. They jumped last week to one-year highs, spurred by concerns that inflation would rise as the economy recovered from the coronavirus pandemic.
Stocks finished lower Tuesday and the S&P 500 failed to extend a rally following its best trading session since June.
2. — Wednesday's Calendar: Marvell Earnings, ADP Employment Report
Earnings reports are expected Wednesday from Dollar Tree (DLTR) – Get Report, Marvell Technology (MRVL) – Get Report, Snowflake (SNOW) – Get Report, Splunk (SPLK) – Get Report, Vroom (VRM) – Get Report, American Eagle Outfitters (AEO) – Get Report, National Beverage (FIZZ) – Get Report, Wendy's (WEN) – Get Report and Okta (OKTA) – Get Report.
Marvell is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MRVL? Learn more now.
The economic calendar for Wednesday includes the ADP Employment Report for February at 8:15 a.m. ET, the PMI Composite (Final) for February at 9:45 a.m., the ISM Services Index for February at 10 a.m., Oil Inventories for the week ended Feb. 26 at 10:30 a.m. and the Federal Reserve's “Beige Book” at 2 p.m.
3. — Rocket Drops After Tuesday's Surge
Shares of Rocket Cos. (RKT) – Get Report fell in premarket trading Wednesday, following Tuesday's gains of 71% that got a boost from falling interest rates and a strong earnings report, and attention from retail investors.
GameStop (GME) – Get Report and AMC Entertainment (AMC) – Get Report before it, Rocket, the parent of Quicken Loans and Rocket Mortgage, has become a target on Reddit's WallStreetBets forum because of its high short interest. The company reportedly has large short bets placed against it by hedge funds.
“Rocket Mortgage-why was 38% of this company sold short?” TheStreet's Jim Cramer said in a tweet on Tuesday. “It’s a really solid company, may not be your fave if rates soar, but it is so well run!”
Rocket last week reported fourth-quarter earnings and revenue that topped analysts' expectations. The company completed a year of record mortgage volume and said it would pay a special dividend of $1.11 a share.
Rocket shares declined 7.72% to $38.39 in premarket trading.
4. — Oscar Health Raises $1.4 Billion in IPO
The initial public offering for Oscar Health (OSCR) – Get Report was priced at $39 a share, raising $1.4 billion for the New York digital health-insurance company.
The target price range on the sale of 31 million shares was raised to between $36 and $38 a share on Tuesday, up from its previous estimate of $32 to $34 a share.
The IPO values Oscar Health, which is backed by Google parent Alphabet (GOOGL) – Get Report, at $7.7 billion.
Oscar Health was founded in 2012 by CEO Mario Schlosser, Kevin Nazemi and Joshua Kushner, the younger brother of Jared Kushner, the son-in-law of former President Donald Trump.
The stock will begin trading Wednesday on the New York Stock Exchange under symbol “OSCR.”
5. — Lyft Has Its Best Week Since Last March
Lyft (LYFT) – Get Report said ridership in the last week in February was its best week in nearly a year and the company forecast a narrower adjusted Ebitda loss for the current quarter than previously projected.
The ride-sharing company said February monthly average daily rides rose 4% from January.
Lyft said it now sees a first-quarter adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) loss of $135 million, narrower than previous expectations of a loss of $145 million to $150 million.
Lyft tied the improved outlook to “reduced operating expenses and to contribution margin, which is expected to be at the top end of the previously provided range.”
“Lyft is a core recovery name with a vaccine on the horizon,” said Wedbush analyst Dan Ives in a note Wednesday. Wedbush has a price target of $72 on the stock – bull case $85 – and rates it outperform.
The stock rose 4.24% to $59.48 in premarket trading Wednesday.