By Winny Sun
Lyft went public last month on March 29th. On its first day of trading, Lyft’s share price rose by 8.7%; it hit a valuation of $26.4 billion by the end of the day. But the strong stock performance did not hold for long. On its second day of trading, Lyft’s share price dropped by 12%, closing below its initial public offering price of $72.
The main issue with the stock volatility is that Lyft is not profitable. Although its revenues doubled between 2017 and 2018, its total losses also increased from $688.3 to $911.3 million. To win business from other ride-sharing companies like Uber, Lyft offers drivers incentives and passengers discounts. Since it also wants to grow in sectors like bike-sharing and autonomous driving, the business always incurs high levels of spending.
Despite its revenue shortfalls, Lyft still paved the way for many other tech companies. Its close rival Uber will go public soon, though the exact date has not been set. When it finally gets listed, Uber may value at $100 billion, becoming the most valuable global stock offering in the past five years. But even with such optimism, it is still uncertain how sustainable Uber will be. Much like Lyft, as Uber strives to recruit drivers and riders to gain a large market share, it is quickly burning through cash. Uber’s success will largely depend on whether it can minimize spending and maximize profits.
As leaders of Uber continue to ponder when they want to go public, other popular tech companies like Pinterest and Zoom are already making moves. Pinterest has a market value of over $16 billion. Investors are quite optimistic about its future, mainly because it is losing less compared to Lyft, which lost nearly $1 billion in the past year, and Uber, which lost $1.8 billion. However, the tech company also has its own share of problems. With a focus on personal planning, Pinterest is able to stay away from misinformation and toxicity found commonly on social media sites; however, as it relies on advertising revenues, it still faces intense competition from the likes of Facebook and Google.
Surprisingly, a lesser-known start-up that went public on the same day as Pinterest yielded better results. The share price of Zoom, a video-conferencing company, rose by 72% on the first day. The business now has a market value of more than $18 billion, demonstrating that investors care as much about the prominence of a brand as its profitability.
Despite slight fluctuations in share values, the debut of a number of tech IPO in the stock market this month bodes well for those that are to come. Decision-makers at Uber, Slack, and other up-and-coming firms will need to think carefully about their business strategies. As Pinterest’s chief executive and co-founder Ben Silbermann remarked, “In a few years, people might remember it as a moment in time, but the companies will be judged very differently five years down the line.”