- Both Uber and Lyft fell to record lows on Wednesday, showing that investors are shying away from unprofitable unicorns.
- The ride-hailing duopoly has posted major losses since going public. Uber lost $US5.2 billion in the second quarter, while Lyft lost $US644 million.
- Other high-profile IPOs have faltered. Peloton’s recent offering fell flat, and WeWork’s was cancelled after investors raised concerns about the company.
- Read more on Business Insider.
Shares of Uber have plummeted 35% since the company’s initial public offering in May, while Lyft has lost more than 45% since debuting in April. The declines suggest that investors are growing increasingly hesitant of the unicorns, or companies valued at more than $US1 billion in the private market before conducting an IPO.
Of particular concern has been the companies’ lack of profitability. Uber and Lyft are both stuck firmly in the red since their public debuts, with no relief in sight. In the second quarter, Uber posted a $US5.2 billion loss, while Lyft lost $US644 million.
Beyond that, Uber and Lyft will likely have a bumpy road ahead as backlash and legislation around employment mount. Both Uber, Lyft, and DoorDash have pledge $US90 million for a vote of Assembly Bill 5 in California, a bill that if passed would mean the companies have to give workers benefits.
Still, There are still some bulls who say to stay in the ride-hailing companies’ stocks. Lyft recently got a glowing recommendation from Wells Fargo, is confident Lyft can take sizeable market share from Uber. Wall Street is bullish on Uber as well, pointing to the potential size of the ridesharing market – estimated at $US1.2 trillion by Wedbush analyst Dan Ives.
Aside from Uber and Lyft, other recent IPOs have fallen flat. Peloton, the fitness bike company, had the third-worst trading debut for a mega-IPO since the financial crisis.
Meanwhile, some unprofitable companies have been unable to go public at all. WeWork recently scrapped IPO plans, electing to focus on its core business after a whirlwind few weeks that saw investors rebel against CEO Adam Neumann’s leadership.
With the capital injection and debt financing enabled by an IPO, the company could run out of money as soon as next year, according to Bernstein.
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