More news is coming about profitability (or lack thereof) of ridesharing companies with the release of Lyft’s IPO announcement – what does this mean for drivers and investors? Senior RSG contributor John Ince answers that question, and covers how a Lyft-dominated city feels about rideshare, in this week’s round up.
This week in rideshare news is also on our YouTube channel! Check out our video coverage of even more rideshare news over on YouTube here!
Lyft outlines all the reasons ridesharing could fail, in its IPO documents [Washington Post]
Sum and Substance: … The IPO of Lyft — and competitor Uber’s anticipated stock listing later this year — is a turning point for one of the most popular innovations to come out of Silicon Valley in recent years.
The discount, door-to-door ride business supplanted the taxi industry, aggravating city regulators in the process and ushering a new class of workers under the gig economy. But many see the on-demand car and driver model as only a stepping stone on the way to a broader revolution in transportation spurred by driverless technology.
Lyft and Uber both have placed their bets on a driverless future, pouring millions into research and development for autonomous systems that could be less costly than splitting fares with drivers. But they’re also competing with other Silicon Valley giants, such as Waymo, which belongs to Google’s parent company Alphabet, and Detroit-based automakers to be the first to launch autonomous ride-hail services.
… Lyft may never become a profitable company, the company said in disclosures that are mandatory in the IPO process. It lost $911 million last year on revenue of $2.2 billion.
“We have a history of net losses and we may not be able to achieve or maintain profitability in the future,” Lyft disclosed in a required Securities and Exchange Commission document before launching its IPO “road show” this month, where it will tout the company to investors.
… In its disclosure, Lyft outlined upwards of 70 potential downsides for investors related to its business and the ride-hailing market, laying bare the uncertainty facing one of the most anticipated public offerings in years. Perhaps its rapid expansion into bikes and scooters could backfire if those modes fail to create a sustainable market, causing the company’s growth to stall. Or self-driving cars might not take off as anticipated…
My Take: One of the really cool things about IPOs and S-1 statements is that they force the company to come clean and detail all the risk factors facing them. These lists are often informative in ways that no other source will show.
That’s what we have summarized in the Washington Post piece. Good for them in getting all this out there. But don’t deceive yourself into believing that most investors will pay any considered attention to these very real risks. No.
The investors are interested in only one thing, and they heard just what they wanted to hear mid-week with the leaked story that Lyft’s IPO was already over subscribed. With pent up investor demand exceeding supply, any investor getting in at the IPO price can unload their shares six seconds after the opening bell if they get enough of an opening pop. Then they’re happy. They made a good trade.
Who cares if Lyft has a viable business model or not? Who cares how much they’re losing every year? Who cares how they treat drivers? All these investors care about is whether they can sell their shares for more than they paid. And it’s looking like Lyft has enough headwinds to make a lot of very happy investors and employees.
Investors Ask Lyft to Scrap Two-Share Plan Ahead of IPO: FT [Bloomberg/Financial Times]
Sum and Substance: A group of pension funds, unions and asset managers in the U.S., the U.K. and Europe has called on Lyft Inc.’s board to remove a proposed dual-class share structure ahead of an IPO pitch to investors, the Financial Times reported on Saturday, citing a letter sent to directors last week.
Lyft should stick with its single class of shares with one vote each when it debuts on the Nasdaq exchange as a switch to a dual-class structure imposes unnecessary risk to potential shareholders, according to the letter. If Lyft’s board fails to address the issue, it should adopt a provision to phase out the extra voting rights in seven years, it said.
My Take: Lyft is going with an IPO plan that gives the shares of Logan Green and John Zimmer 20 votes to one vote for other shares. This gives Lyft’s co-founders 49% of the voting rights – essentially complete control over the company.
Think about that. Two people can together make decisions that will affect millions – drivers, passengers, investors, employees – with no checks on their power. No wonder these potential investors are objecting. Also: check out the comments to the FT article.
Lyft’s driver wage lawsuit in NYC continues [Techcrunch]
Sum and Substance: As Lyft gears up to list its stock on the NASDAQ, the transportation company is facing ongoing litigation regarding driver wages in New York City. Today, a judge denied Lyft’s motion for an injunction blocking the recent ruling that sets a minimum wage for drivers. Still, the judge said she’ll think it over and file a written ruling in the next 30 days. This comes shortly after a number of drivers protested Lyft’s lawsuit against the city of New York earlier this morning.
“We are pleased the judge denied Lyft’s motion to block the wage protection rules for now and we hope she will uphold the city’s rules in her written decision,” Independent Drivers Guild member and Lyft driver Tina Raveneau said in a statement. “Eighty thousand New Yorkers serve as professional drivers for apps like Lyft and we deserve the protection and the dignity of a livable minimum wage. It is like a punch in the gut to us, the drivers who helped build this company, that Lyft stood in court suing to block higher wages at the same time as they moved toward an IPO at a $23 billion valuation. We are finally making more than we have in years thanks to the new pay rules, but Lyft wants to bring it back to the way it was before, poverty wages.”
Lyft filed the lawsuit earlier this year, arguing the new rules give an advantage to Uber, will reduce driver earnings and exacerbate congestion. At the time, Lyft said its suit was “not directed at the law passed by New York City Council, but rather at the TLC’s complex formula for implementation.” Lyft is a proponent of a weekly pay standard but argues the TLC’s approach does not take into account things like drivers who use multiple apps and fluctuating demand. …
My Take: At a time when thousands of Lyft investors and employees are soon to be millionaires because of their stock in the company, it seems especially jarring to see the same company continuing its litigation in New York City to deny legislation that would simply guarantee Lyft drivers a minimum wage, after expenses.
What Readers Have to Say About Lyft Dominating Uber in Portland [Williamette Week]
Sum and Substance: Last week, WW compared transaction data for Portland Lyft and Uber rides (“Lyfted,” WW, Feb. 20, 2019). The results? Portland is the rare U.S. city where Lyft dominates Uber. The reason is unclear but could trace back to the #deleteUber campaign in 2017 and the bad press the company got for using a tool called Greyball to evade Portland regulators. Here’s what readers had to share.
Greg Wilson, via Facebook: “We always go with whoever is cheapest. And Uber is always cheaper!”
Lizzie Johnson, via Facebook: “I always compare the prices between the two, and Lyft is always cheaper!”
Sharde Nabors, via Facebook: “I drive for Uber Eats but I ride exclusively with Lyft. *shrug*”
Gianna RM, via Facebook: “Because we vote with our wallets and prefer to hire companies that have better values than their competitors.”
My Take: This article is basically a collection of random quotes from drivers and passengers about the Uber vs. Lyft issue in Portland, Oregon. It’s noteworthy because Portland is one city where Lyft seems to have pulled ahead of Uber.
Could this happen elsewhere? Read the quotes and decide. It’s really the quintessential issue that has and will continue to define the outlines of the ongoing slugfest. Even the upcoming IPOs will ultimately be a test between the two companies. May the best one win….
Readers, what do you think of this week’s round up?
-John @ RSG