Lyft has a 'clear early-mover advantage' in beating Uber to an IPO

John ZimmerLyft’s founders, Logan Green and John Zimmer.
  • Lyft has begun the regulatory steps for an initial public offering, it said Thursday.
  • While both Lyft and its competitor Uber are deeply unprofitable, one analyst says the economics look better for Lyft.
  • Santosh Rao, of Manhattan Venture Partners, says Lyft could be worth more than $US19 billion in the near term.

Lyft on Thursday said it had confidentially filed a draft registration statement with the Securities and Exchange Commission for an initial public offering that could come early next year.

While the ride-hailing company is still much smaller than Uber, its earlier entry to the stock market ahead of other competing firms will give it a key advantage, according to a Wall Street analyst.

“Lyft has the clear early-mover advantage, and they will definitely get the benefit of the doubt,” Santosh Rao, the head of research at the merchant bank Manhattan Venture Partners, told Business Insider. “No one knows how to value these companies. Is it a software company? Is it a car company? Is it a service?”

Rao, who specialises in late-stage, pre-IPO company research, says the most accurate comparison is to platform companies, such as Etsy or Alibaba. Based on these multiples, Rao’s firm estimates a fair value of Lyft to be $US19 billion to $US20 billion.

Still, Rao acknowledged that “no one knows the exact economics of it.” He added: “There is a whole range of estimates out there. Some people estimate autonomous vehicles will totally revolutionise the benefit and make 70% of their costs go away, but that is still way out.”

Read more:
Lyft officially files paperwork for an IPO

Both Uber and Lyft are deeply unprofitable, with quarterly losses for both companies in the hundreds of millions. (Uber self-reports some financials, while Lyft’s were reported by Bloomberg.)

This isn’t necessarily a deal breaker. There are plenty of money-losing public companies. Tesla, for instance, recently turned a rare profit in its most recent quarterly earnings report, despite many years on public exchanges.

Now that the race to go public could be ending, the battle between Uber and Lyft could turn in to a race for profitability.

“I think the economics are much better” for Lyft, Rao said. “The PR is better and profitability is much closer.”

Uber did not immediately respond to a request for comment.

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