There will be plenty more battlegrounds as many private technology companies plan for IPOs. That has prompted predictions that 2019 could be the busiest year ever for new issues, as measured by money raised. Other big names in the queue, besides Uber, are data-mining giant Palantir Technologies Inc. and Slack Technologies Inc.
Lyft is expected to pitch itself to potential investors as a comprehensive ride-hailing service offering access to cars, bikes and scooters, mostly in the U.S., and one that won’t be saddled with losses from competing globally.
Like many fast-growing technology companies, Lyft is planning to debut with supervoting shares that will give the company’s founders near-majority control, despite together owning a stake of less than 10%, The Wall Street Journal has reported.
Many of today’s unicorns have been able to stay private for much longer than would normally have been the case because of the flood of capital that has been available from private equity firms.
If we think about the successes and failures of extraordinary monetary policy the surge in private capital into speculative ventures is a success if at least some of these companies can transition to commercial successes. Ridesharing, reusable rockets, electric vehicles have all been made possible with abundant liquidity. On the other hand, there are certainly going to be some spectacular failures once access a lack of abundant liquidity truly tests business plans.
Lyft is at least going to offer a relatively narrow argument for why it can approach profitability by being a ride hailing company with a geographic focus. The big question is how much larger it can get and whether the new share will already be fully valued. That is the other side of the QE argument. These companies have waited so long before IPOing that it is arguable whether all of the value has already been extracted before the listing.
I believe it is quite likely the recent surge in interest for IPOs is further evidence of late cycle activity where private equity wants to get its money out before liquidity dries up. Additionally, IPOs represent an additional source of supply which will compete with or at least partially counterbalance the supply limiting effect of share buybacks.
The Renaissance IPO Index pulled back very sharply in the 4th quarter and has shared the sharp rebound in risk assets so far this year. It is short-term overbought and susceptible to some consolidation, like much of the wider market.