Lyft’s IPO is outperforming Uber’s in one crucial way

The second IPO is here.
The second IPO is here.
Image: AP Photo/Ringo H.W. Chiu
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It’s a big day for Lyft employees. When trading begins on the Nasdaq this morning, they can finally sell their shares.

Like most companies that go public, Lyft included a lock-up period in its IPO terms that barred company insiders—employees, management, and pre-IPO investors—from selling their holdings for 180 days from the day of the offering. The lock-up was supposed to last until Sept. 24, but the company said in its recent quarterly report that it had pushed that date to Aug. 19 because the original date conflicted with a routine “blackout” period that limits trading before the end of the quarter.

With the end of the lock-up, Lyft expects nearly 258 million shares of its Class A common stock to become eligible for trading, out of a total of around 280 million, or 341 million on a fully diluted basis that includes shares that have yet to be converted. Lyft co-founders Logan Green and John Zimmer and chief financial officer Brian Roberts, who collectively own about 5.6% of the company’s stock, have told equity analysts they don’t plan to sell when the lock-up ends. But that still leaves a lot of shares to flood the market, putting downward pressure on Lyft’s stock price.

Tom White, analyst for DA Davidson, told Quartz in an email that he expects to see early investors sell today. “Given how long that LYFT was a private company for, we believe some of its early investors are effectively sellers at any price,” he wrote.

Lyft went public in late March at $72 a share. Since then, the stock has fallen about 27%, closing at the end of last week at $52.47.

Most pre-IPO Lyft shareholders are still poised to book solid gains. The earliest Lyft backers bought in for less than $1 per share. Through its Series D funding round in April 2014, the company priced its shares at $10 or less, far below the current trading price.

Later-stage private investors, though, are sitting less comfortably. Investors in the company’s final private funding round, which Lyft’s IPO filing identified as “entities affiliated with Fidelity Management & Research Company,” bought shares priced at $47.35 in June 2018, just 10% below where the stock closed last week.

Lyft was the first hotly anticipated “unicorn” company to go public this year, meaning it will also be the first to see its lock-up period expire. Both Lyft and main rival Uber, which went public in May, have disappointed on the public markets, with their share prices sinking well below their IPO prices.

Lyft declined to comment on the record for this story.

Uber has felt the post-IPO selloff acutely. Shares of Uber closed last week at $35.23, 22% off their $45 IPO price. On first read, that looks slightly better than Lyft, but keep in mind that Uber priced near the bottom of its IPO range to begin with. In other words, Uber sold shares at a discount to what it hoped for, and they have since traded at an even greater discount.

The result is that several later-stage Uber investors are currently underwater. Investors in Uber’s various Series G rounds—including Saudi Arabia’s Public Investment Fund, Didi Chuxing, and Softbank—bought in at $48.77 per share. That ended up being more than Uber’s IPO price, and now represents a nearly 40% premium on the company’s current trading price. Investors in the Series E round, meanwhile, are flirting with the line between making and losing money: They paid $33.32 each, a figure Uber traded on either side of last week.

Uber couldn’t immediately be reached for comment.

James Cordwell, an analyst for Atlantic Equities, said lock-up expirations can be a good day to buy a stock. “With Lyft we’ve certainly seen the selling pressure—the stock’s down over 20% since mid July—and time will tell whether Monday will have been a good buying opportunity,” he said in an email.