21 ms·

Lyft’s IPO disclosure shows it’s not close to profitability

210 points by howard941 8y ago

chollida1 8y ago
Sadly for Lyft I think the best comparison will be Snap. And just one look at the SNAP chart will tell you why you should avoid the Lyft IPO. It will go public at an inflated price and hold that valuation for a quarter or two and then people will start asking where either the profits or growth are and Lyft will need to start growing or erasing their huge operating losses right at the same time Uber is trying to grab as much ride share as possible gearing up to their own IPO. So at a time when the market will be starting to really pressure them to cut losses, probably by cutting the driver's portion of revenue and raising prices, Uber will be trying their best to inflate their own ride share metrics by giving drivers more and cutting ride costs. What is the story you can tell that paints Lyft as a good investment over the next 2 year period? Then there is Lyft's dual share structure will get it kicked out of many ETF's. This locked in money is a godsend to most companies as they help buoy the stock price by having locked in holders of teh stock during turbulent times. I think MSCI will put Lyft into some of its indexes given that it just put in 8-10 Chinese companies with dual listing share structures One thing I do like in Lyft's favour is that they could be a counter cyclical stock, ie they do well when the rest of the market isn't, due to people using Lyft to replace a second car or a lease that they've given up. We just haven't had a recession while ride sharing was a main stream thing. > Zimmer, Lyft's cofounder, went on to assert that private car ownership would “all but end in major U.S. cities” by 2025. Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:)
- malandrew 8y ago
  The US hasn't had a recession while ride sharing was a mainstream thing, but other markets have.
  - pishpash 8y ago
    Car ownership will be cheaper during a recession. Driver pay can't go much lower, especially with various social proposals being put on the table for 2020.
- ddingus 8y ago
  He is way early. Functional, competent self driving cars are not here yet. As we get closer, I think we will find few will want to own them. Why bother? There are reasons, but those are few compared to those readons for cars we drive ourselves. We are likely to find, people will question the number of cars and share them a lot more. But that state is still a very long way off. The current slump in sales is both economic (way too many Americans buying used because new is not worth it, given tepid income) ...and a wait for EV cars to really arrive at price points worth buying new. Looks like private car ownership is on the wane, but not really, not yet. My .02
  - jdsully 8y ago
    Physics says if I don’t have my own car I’ll have to wait for one. The rideshare could leave a ton in the parking lot but that negates all the projected cost savings from higher utilization.
    - ddingus 8y ago
      In most cases, having your own car will mean driving it too. I have been asking people about this. Many will just build the wait into what they do, and will count on software minimizing that with predictive behavior. Personally, I have zero desire to own a self driving car. I could potentially own one with that option, but the expense will get in the way. Just not worth it. Younger people will just adapt, meaning longer term ownership trends will not be good. Except for classic, you drive cars. Demand and value will grow nicely as people maintain them. Frankly, they will have to be legislated off the road. Well off people will own, but that will be a minority case.
      - jdsully 8y ago
        Most people like leaving crap in their car and having it ready at a moments notice. I definitely think people will want self driving cars - but as a feature in the car they buy. The exception will be those in the city where it’s a pain to find parking.
- gautamdivgi 8y ago
  I think the rush of IPO's may be because of some economic clouds on the horizon. Investors are probably looking to cash out while the going is good.
  - bfrog 8y ago
    It's a game of hot potato, last one holding is the sucker
  - linuxftw 8y ago
    It's a leading indication of recession, as is mergers and acquisitions. Easy money (credit) dries up at the end of the business cycle, companies can no longer raise capital in private markets (or traditionally, through debt), go seek money from the markets. Similarly, large companies cannot grow revenue because there are fewer startup businesses/businesses are not expanding, and to grow revenue they buy other companies.
- leesec 8y ago
  Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of revenue pouring in and you'd think they'd be able to dial back their rapid expansion at some point to become profitable.
  - bduerst 8y ago
    Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.
    - linuxftw 8y ago
      Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
      - bduerst 8y ago
        A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
- fullshark 8y ago
  > What is the story you can tell that paints Lyft as a good investment over the next 2 year period? There's only one: it gets acquired
- notyourwork 8y ago
  > Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:) Anyone who is signing up for payment plans that stretch 6 years is crazy and buying a vehicle beyond their means.
  - deleted 8y ago
    [deleted]
  - rootusrootus 8y ago
    Or getting the money for cheap. At sub-2% interest I will take as much money as you're willing to lend me.
    - notyourwork 8y ago
      I'm going to guess you are an outlier in the demographic of consumers getting 6+ year car loans.
    - umeshunni 8y ago
      +1 - I got a 6 year car loan from my CU a couple of years back for next to nothing and at this point, my savings account at the same back has a 2x higher interest rate.
  - thatfunkymunki 8y ago
    I got a 0% loan for a 6 year term on a new car in mid 2016. I think it was a great idea, effectively was given a discount on the car on top of the negotiated price at that rate.
    - kazinator 8y ago
      You think, but anyone who walked into that dealership with cash would have gotten a better deal on exactly the same car, and so would someone who goes for non-zero-% financing. There is no free lunch; you're not going to get a better financed deal than someone who pays and waves goodbye. There is no 0% financing without a catch.
- esturk 8y ago
  I don't consider car leasing to be car ownership. It's like saying leasing a house is home ownership. With that said, car leasing is on the rise. https://www.fool.com/investing/2018/06/08/why-rising-car-leases-should-worry-automakers.aspx https://www.fool.com/investing/2018/06/08/why-rising-car-lea... So Zimmer's prediction is still at play here.
  - ghaff 8y ago
    Leasing is just a financing model that may have implications for how assets are carried on a balance sheet.
- sp332 8y ago
  Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that?
  - chollida1 8y ago
    > Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that? Well Lyft ha a good product and plenty of customers and is currently being crushed in terms of market share. Wait till you hear about this company call Uber. They are 5x the size of Lyft and are capable of outspending Lfyt until Lyft is bankrupt.
  - deleted 8y ago
    [deleted]
- rb808 8y ago
  That would just mean its a zombie company that's going down sooner or later. If making it public makes it fail quicker, that is good thing. Keeping it out of the light and pretending its a good company just prolongs the inevitable.
- temporalparts 8y ago
  An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that might want to get into ridesharing is long, and Lyft is the fastest (and probably cheapest if the stock tanks) path towards competing against Uber in the US market. Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc. Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc. There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.
  - mrnobody_67 8y ago
    Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
    - pgt 8y ago
      A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
      - whymauri 8y ago
        I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
        SatvikBeri 8y ago
        As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.
- benatkin 8y ago
  On Facebook this morning, I was shown an ad from a page called "Uber Assault", which was about a (potential) lawsuit over riders being assaulted, and there were a bunch of people chiming in that they didn't feel safe being Lyft/Uber drivers so they quit. It seems that perhaps drivers are more at risk than riders because even though the approval process for becoming a rideshare driver is very weak, it's much weaker for becoming a rider. Either way, people who had a bad experience were likely to avoid using it. I don't think Uber/Lyft is going to replace car ownership anytime soon, maybe for the six foot tall man like me but not for everybody. Another problem is waiting for a car. I got robbed once while waiting for an Uber. One solution might be to wait for the Uber driver to arrive and then go outside. I tried this once the other day, not for safety but so I could hang out with friends. The Uber left less than a minute after I got messaged, and I got charged the $5 fee, so that isn't practical. It feels safer to be walking to a bus or rail stop, or to be waiting at a stop, than it does to be standing on a corner waiting for a car. The idea that Uber/Lyft is going to replace private car ownership for everyone because it's replaced it for some is ludicrous. Public transit has done more to replace it for me (car-free by choice for 5 years) than Uber/Lyft. I usually only use Uber/Lyft when I'm in a hurry, and the cost Uber/Lyft rides just about cancels out the time savings. Self driving cars might one day replace it, but I don't think that Lyft or Uber is going to be at the forefront of it. If they are it will make me more frustrated with how the tech industry operates, because it will show that the value of investment and brand far outweighs expertise. Uber/Lyft contain a tiny fraction of the deep learning, automotive, and transportation expertise that will be needed to pull off such a thing. Finally the term "major cities" brings up the "no true scotsman" fallacy a lot. "Rent is high in major cities." Oh yeah? Dallas isn't a major city? If I don't live in a high rise downtown I'm not really living in Dallas? Eventually every major city will be eliminated in an argument and it will turn out that for the sake of the argument, there aren't any major cities in the world.
- asabjorn 8y ago
  I agree. In addition to this its main competitor Uber has many other business units (eats, freight, etc) and can reinvest revenue from other countries where it is the leading rideshare provider. The S1 shows that Lyft on the other hand is loosing a significant amount of money on all trips through its position as the second player in all markets its in. How is it supposed to decrease that loss?
- hopler 8y ago
  "major us city" is quite a weasel term. Manhattan? Queens? SF? San Jose? Phoenix? Austin?
throwaway-1283 8y ago
Basically what will happen is that in some month X after IPO the company will be forced to pull back on new driver incentives (the thing that is really making these companies bleed cash), which will slow driver supply growth, which will increase rider wait times and/or make prices spike, which will lower demand, and thus slow growth, and kill the stock price. I wouldn't touch this at all. Or short it if you're brave :)
- linkregister 8y ago
  If/when Lyft decides it can't grow any more, it will dump the unprofitable cities and focus on the cash cows: LA and New York, etc. The large cities are quite profitable and will be enough. That said, it's better for society if the unprofitable cities are served by competing ride sharing services. It's kind of like how the US Postal Service makes money in the cities and loses it in rural areas.
annon 8y ago
Giving the founders 20-to-1 voting rights over regular investors while losing as much money as they are is insane. This really looks like a lemon, and the VC's want to cash out and leave public investors holding the bag. I don't see how self driving cars are going to help them. Waymo and Tesla are both the farthest along, and they're going to run their own networks - competing against Lyft and Uber.
- nfriedly 8y ago
  I don't really disagree with you, but I think (or, at least, hope) that there will be room for more than 2-3 players in the "self driving taxi" market.
  - erikpukinskis 8y ago
    The thing that would cause that is if there is some requirement for massive amounts of difficult to obtain data that is required to build a competitive system. I do think data is a competitive advantage right now. But I find it really hard to believe that 10 years from now it will be harder to build a self driving system than today. That's just not how tech is. Building YouTube was a herculean endeavor 15 years ago, but today you can hack a YouTube clone together in hours. Not just will we have more off the shelf software and hardware, but maybe you can license the data too. In the end, I don't see the moat around a self driving cab company. If someone has a good app and a single car that operates in my area, why not switch to them? Sure there are wait times and availability in odd places. But that doesn't inhibit a startup getting early adopters. You could literally just do the same commutes every day and have a profitable business. Lastly, I expect the variety in vehicles and "mobile spaces" will provide a huge landscape of opportunity that a single company will not be able to fill. Just like there is not one "housing" company, there won't be one mobile housing company either. Too much variation in taste and preference.
    - samstave 8y ago
      Personally, I think that Tesla could own the entire market, regardless of operator, if it were to develop the defacto standard rideshare vehicle, and financed it as such a % of the rideshare market. See every yellow cab in NYC, as an example, is the same make/model of car. Make a tesla Y vehicle and have the rideshare payment subsidize the car. So X% of every single ride goes to tesla to finance the car. And guess what they get as defacto: the data. Let people qualify as a driver and put down a deposit, and the car must meet a quota of rides per month, which is tracked and displayed as the car is simply a 'device' at that point... and must be used to pay it off. Tesla doesnt care where the rider bookings come from, lyft, uber, whatever. If the car is used for private purposes - then the owner is charged some function of the car's time as his "car payment" Simple.
ProAm 8y ago
The problem with both Lyft and Uber is they have MASSIVE VC investments they need to pay back, and while the business model is good its not nearly good enough to payback VC within the 10 year window. Uber will be in the exact same boat next year.
- thcsa 8y ago
  It's not the companies (and their earnings) who will pay back investors. Other bagholders will do that once they go public.
- throwaway-1283 8y ago
  What do you mean "pay back"? If you're talking about liquidation preferences those all go away in an IPO.
  - ProAm 8y ago
    All the investors that 'purchased' a percentage of the private company with their investment during funding rounds will want to see ROI when the company goes public (or if the company is insanely profitable while private). Most of these VC's expect to start seeing ROI around the 10yr mark. The company isnt remotely profitable still privately held, so lets go public and get other suckers to buy in so the early investors can cash out and hopefully make a buck or two or at least breakeven.
robot 8y ago
I get a lot of promotions from lyft that make me think they're desperate.
- sumitgt 8y ago
  I think it's just part of the blitzscaling process.
- Invictus0 8y ago
  They're not really promotions. All those 20% off emails only give you 20% off Lyft's fee, not the whole fare. It saves you a total of maybe $2 on an average ride.
  - popz41 8y ago
    I disagree, my email yesterday said "50% off your next 10 rides. You have 10 rides remaining. Max savings of $6 per ride. Discount applies to the fare, Prime Time charges, Service fee, tolls, and taxes only."
throwaway082729 8y ago
Once Waymo has fully autonomous vehicles on the road, they'll look to acquire Lyft for a decent price. Lyft has the brand value and the infrastructure for ride calling (intentionally not using ride sharing) except that drivers will no longer be needed. Profits will be through the roof when that happens.
- leesec 8y ago
  There are 1.4 million Lyft drivers in US and Toronto. Waymo is going to buy and retrofit and provide 1.4 million cars?
  - i_cant_speel 8y ago
    Those 1.4 millions drivers aren't all driving at the same time. They would only need a fraction of that many cars and they could be built over an extended period of time.
    - throwaway082729 8y ago
      Exactly. Also, having self-driving cars does not mean that you only have self-driving cars in your fleet. They could still employ drivers strategically (in areas where demand is high which in turn will increase profitability and distribution to drivers) while using self-driving cars for commutes.
      - sigstoat 8y ago
        > ...(in areas where demand is high... or areas/weather conditions which they know are difficult for their autonomous cars to navigate.
    - leesec 8y ago
      OK so Waymo is going to buy and retrofit and provide 500k cars?
      - 8y ago
willart4food 8y ago
Well same for Uber and we all knew that. It's just the business model (for now). So, in a world where we are all used to Uber/Lyft and there's no turning back, the only way forward is for fares to go up, close to - if not the same - to conventional cab fares. Which will decrease usage, which will decrease the size of Uber/Lyft and therefore their market cap. Sounds like 1999
- ghaff 8y ago
  I honestly, albeit naively, expected that when Uber put in a new CEO, they’d take that opportunity to raise prices to break even levels which presumably end up around where taxis are. Take the volume hit; customers who are only interested in VC-subsided rides aren’t customers you want. But I guess everyone decided to continue to pretend that the current business is sustainable.
  - djsumdog 8y ago
    They're probably still holding on to the dream of the self driving vehicle ... which is practically at least 15 years out at this point .. probably more like 20~25.
    - ghaff 8y ago
      Note that holding onto a dream and making public statements to sucker investors are not necessarily the same thing. I agree with your basic point, especially in the areas dense enough to make taxi-like services work well.
  - willart4food 8y ago
    It's an interesting "Game Theory" type game. The VCs keep finding Uber/Lyft because... they have a lot invested already, and the paper valuation is high; but each round is higher and higher stakes. Once these unicorns IPO's, after the lock-up period the VCs are somewhat free to exit (be careful about dumping). Once IPO'd and the VCs are out, who cares if they crash and burn! But on the consumer side, we're used and hooked to the Uber/Lyft experience and prices. The experience can be duplicated with tech, the prices... not so much. Here's an interesting blowback twist: let's say that on unrelated news TSLA crashes (I am a TSLA investor, so.. not wishing it), it would have ripple effect on the entire tech segment, closing the IPO window for a while. So, then what for Uber/Lyft? We live in interesting times!
pochamago 8y ago
What are the big expenses that cost Uber and Lyft so much? The driver takes the cost of owning and maintaining the vehicle, and they're only paid a fraction of whatever rides they get. Aren't the companies just running an app?
- deleted 8y ago
  [deleted]
- mosdl 8y ago
  They hired a lot of engineers working on internal stuff. Probably will have a large layoff round to reduce costs.
  - EpicEng 8y ago
    They don't lose billions each year on engineering. Not even close.
- lhorie 8y ago
  Biggest expenses are keeping driver supply high in new cities until the service adoption gets traction among consumers, and customer support / fraud mitigation (again, primarily in new cities). For the most part, established cities are profitable (at least for Uber, I don't know the story for Lyft).
  - pochamago 8y ago
    That makes sense, but it makes me skeptical, then, of the article's claim that they have no path to profitability.
    - Sohcahtoa82 8y ago
      Many investors are extremely short-sighted.
    - lhorie 8y ago
      The better analyses I've seen say that Lyft could be profitable, if they stopped subsidizing growth via their profit centers, but then they have to somehow overcome the one-trick pony problem and it's not very clear how. Uber, on the other hand, has several verticals, and also enough muscle to be able to strike profitable deals w/ local competitors, as it has already done in various countries.
samstave 8y ago
What level of equity are Uber and Lyft drivers given in the company? Any? Are they "earning shares per mile" or anything like that? If not - then screw both companies, and I hope they do poorly in the IPO -- even though ridesharing is such a wonderful service - I really hope they do right by the literal foundation of their existence, which is the drivers.
- kbutler 8y ago
  How much of their cash compensation should come in the form of stock instead?
- EpicEng 8y ago
  That seems completely unreasonable. Lyft contracts with more than 700k drivers. How in the world could they give each driver a meaningful share of options while also maintaining a controlling interest in the company? Let's also be real here; the supply of drivers is endless. It's about as far from a skill position as one could imagine. Would you be ok with their pay being decreased as well?
  - Marsymars 8y ago
    > How in the world could they give each driver a meaningful share of options while also maintaining a controlling interest in the company? Not commenting on the practicality, but when choosing between traditionally cab companies, I preferentially go with ones that are driver/employee owned.
- ptero 8y ago
  Giving drivers equity in the highly speculative company strikes me as a strange requirement. It may be attractive to some, but irrelevant for others. If I worked for Lyft or Uber I would much prefer any earned money given to me in cash which would let me decide what I want to do with this money: invest in IPO or post-IPO shares, invest elsewhere or spend it on something different. My 2c.
- plink 8y ago
  They shouldn't for the same reason that McDonalds doesn't give equity to cows.
fargo 8y ago
Would it be wise for someone to go work for lift given this information? Asking for a friend...
lukewrites 8y ago
I think both Lyft and Uber are pursuing IPOs because the private market has soured on them. The VCs want to get their payout and are starting to fear a down round…so the companies will go public, the investors will get their payouts, and whoever buys will eventually regret it.
Animats 8y ago
"The dual class structure of our common stock has the effect of concentrating voting power with our Co-Founders, which will limit your ability to influence the outcome of important transactions, including a change in control. Our Class B common stock has 20 votes per share, and our Class A common stock, which is the stock we are offering by means of this prospectus, has one vote per share." No-voting-power stock for a company that's losing money? No. Companies that have done that before, such as Google and Facebook, were profitable before the IPO. That's when you want to keep the management team. With Lyft's numbers, firing the current management might not be a bad idea. They've had their growth phase; now they need to move to profitability. If you haven't read an S-1 before, you skip all the happy talk and go directly to "Consolidated Statements of Operations".
- djsumdog 8y ago
  To be fair, I doubt any management could make ride-sharing companies profitable. The sooner they go under, the sooner drivers start making livable incomes again.
  - dnautics 8y ago
    > The sooner they go under, the sooner drivers start making livable incomes again. Have you actually been a driver? I can assure you that having been one, in the Bay area, even, the income was quite livable.
    - i_am_nomad 8y ago
      There’s the common impression - misconception? - that driving for rideshare companies is a losing game, and that drivers end up making very little money after fuel, repairs, and depreciation. For a while, it seemed like every day there was another article breaking this down and “exposing” Uber and Lyft. Having never driven for them, I can’t verify whether this is true, but just a quick back-of-the-envelope guess seems like drivers in the Bay Area could average $40 - $50 an hour. That doesn’t seem like minimum wage level to me.
djsumdog 8y ago
Lately my phone will die at 30% charge. I've ordered a new battery but last week it went out while I was looking for a Lyft. I normally don't use taxis but it was cold and I was tired. Luckily I was near a train station and it was still early enough the buses were running, so I knew which transfers to make and which bus to get on without needing a map. Still I thought about how only a decade ago, I could be on this same street and hold up my hand and flag down a Taxi. Today if I really wanted a taxi, they're pretty much only in the city. I'd have to hunt around for a payphone and would need change too. If I didn't know my public transport routes back home or if it was late enough the trains stopped running, I'd be kinda SOL. I realize Taxis not just driving around saves on fuel consumption, but have we lost something by simply not being able to hail a cab without a charged phone or laptop with a Wi-Fi point? I wonder if Uber or Lyft will start putting out kiosks people can use to flag down rides when their phones or out.
- RomanPushkin 8y ago
  Yes, we've lost it. However, it can be fixed. I created app so everyone can be a taxi driver. It's PoC, but actually works. There are tons of problems, no critical mass, security. But anyway, I was once able to find a ride back home from San Francisco. This app is for everyone at https://libretaxi.org https://libretaxi.org (non-profit, open source) Disclaimer: I'm founder
  - coolspot 8y ago
    Interesting that your app is Telegram bot instead of separate application. Will try it given the chance.
  - jon-wood 8y ago
    As much as I love to see Open source solutions to problems having looked at the website this seems like a disaster waiting to happen without any sort of driver vetting. You’ve effectively made an app where people can broadcast to random strangers that they’re waiting around in the street, carrying cash, and far enough from home to need a lift. Sadly we don’t live in a world where something like that isn’t going to be flooded by people with ideas other than making a few bucks driving people home.
pastor_elm 8y ago
Three words: Ads, ads, and ads. Ads is how you make money. All lyft needs to do is incorporate ads into its platform and it will start printing money.
- tgeo 8y ago
  At this point I'm convinced this is a troll account
justfor1comment 8y ago
For me the saddest thing is that even if Lyft stock tanks after the IPO the founders Zimmer and Green will have very little impact to their personal finances. The founders along with the investors will be able to move most of their stock through the markets making them billionaires. It's mostly the Lyft employees stuck in the post IPO lock up period who will be hurt by the dip in stock value. Another reason why the rich keep getting richer.
- puranjay 8y ago
  Isn't the founders' holding severely diluted? They've gone through, iirc, over a dozen rounds of funding and own very little in the company
  - Sohcahtoa82 8y ago
    Even owning 1% of a $15B company still makes you worth $150 million. Dumping even 2% of that $150M would give you enough to retire.
    - draw_down 8y ago
      Yeah. A billion here, a billion there, pretty soon you're talking about real money.
    - ztratar 8y ago
      3M is not even close to enough for retirement in Silicon Valley. Also... 1.6M after taxes.
      - Kye 8y ago
        I thought the usual track was Move to SV -> Get rich -> Retire somewhere cheaper. ~1 million is plenty almost anywhere on the planet. Especially if they go the FIRE route.
        opportune 8y ago
popz41 8y ago
In the past two weeks I've been receiving offers for discounted rides from Lyft. First was 30% off for a week, then yesterday I received a code for 50% off this week. It seems they're trying to inflate their ride numbers quickly. I have not received any promotions prior to this, and I've been a member for over a year.
- scottnyc 8y ago
  No question. It's pretty evident they are aggressively spending on acquisition to boost their top line numbers. Timing wise, this effect will probably show up after they IPO and for their first publicly reported earnings announcement. Which will hopefully keep the stock price high long enough for the employee lock-up to expire.
- FireBeyond 8y ago
  Every day for the past week I've got a "$5/$10 off your next ride" discount email. They all have different codes and expiry dates, so absolutely they're doing this, considering it's the first time in multiple years I've gotten any such thing.
ChuckMcM 8y ago
Yeah. And while this says a lot about Lyft, for me it really really says a lot about Uber too. It has never been impossible to run a company by injecting money into it to cover the difference between how much customers 'value' the product versus what it costs to provide the product. But the dot com days showed that without a point in the business model where the value exceeds the cost by enough margin to keep the business going, such businesses don't survive. What neither Lyft, nor Uber, has yet provided is a credible 'size' at which they would be a going concern (covering all their costs), nor a really good idea of how being larger scales revenues more than costs in sufficient measure to become profitable. I would love to see a document that describes the 'per driver' costs that these companies incur on a location basis (so costs per driver in Los Angeles CA, and per driver in Minot ND) vs revenue expectations per driver vs total available livery miles (how many people would have to want to go somewhere to support those numbers). Then you could at least see if there were any islands of profitability in that solution space. So far, I've yet to see anything where the answer is net positive. Worse, any positive solution will be very fragile by definition because the barrier to entry is zero and so a third party can unilaterally drain profits out of a ride share company by starting up an unprofitable competitor and funding it out of pocket until it has done the required amount of damage.
- bunderbunder 8y ago
  To your last point, my read on the history of taxis in the USA is that that was roughly what was happening during the early 20th century, until some regulation came along to create artificial barriers to entry. Uber broke down those barriers to entry, which allowed them to disrupt the incumbent taxi companies. But it also means that there's not much to protect them from being disrupted themselves. The taxi situation in most cities was awful before rideshare came long, and the taxi cartels' rent-seeking behavior produced produced some gross externalities (the lack of any train lines going to LGA comes to mind), so this has perhaps been a net benefit to consumers. But Uber and Lyft are not charities, and that fact has no bearing on their viability as businesses.
  - xvf22 8y ago
    The lack of any meaningful rail / subway connection at LGA is something I have to deal with on a regular basis. Probably won't change anytime soon either which is unfortunate.
jeffdavis 8y ago
This article seems excessively negative about a company: * Which provided $8B worth of rides in a single year * Didn't hurt anyone For crimes which amount to: * May cost some IPO underwriters money * May not make all of the employees rich * May cost VCs money The worst thing to really say about such a company is "I enjoy their convenient rides but I won't buy their stock". Instead, the article attacks the founders for their age (too young), ridicules their visions of the future, and compares them to other young founders. Bewilderingly, the author compares the founders to Zuckerburg, which doesn't fit the point of the article at all. Not content with all of that, the author takes a shot at Musk for selling fantasies, when he has done more than many people thought possible.
- themagician 8y ago
  Didn't directly hurt anyone in an easily quantifiable way. It's not clear that Uber or Lyft are net positives to society. They are disruptive, but not necessarily in a good way. Yes, they provided $8B worth of rides. But before that people still got around. What the world might have been like without Lyft is impossible to know, but the way it's changed the job landscape isn't exactly a huge net positive. It's put a lot of cars on the road and it's set to new "floor" for jobs in general. Uber, Lyft, Taskrabbit, DoorDash have created a new kind of serfdom. I'm not saying it's a bad thing, necessarily, but I wouldn't say that they didn't hurt anyone. They definitely hurt social progress.
  - googlemike 8y ago
    They (Uber and Lyft) radically reduce drunk driving in every city they enter. They also radically simplify access to transportation for people of color, women, etc.
    - amanaplanacanal 8y ago
      > They (Uber and Lyft) radically reduce drunk driving in every city they enter This is cool if true. Does it show up in accident statistics?
  - 8y ago
badinsie 8y ago
they are the literal definition of a parasite how are they not profitable?
duderific 8y ago
I would gladly pay more than a cab to continue to have the convenience of being able to get a ride when and where I need it. I remember back in the pre-rideshare days, trying to call a cab ahead of time, and having them simply not show up, with no warning or notification.
mattnewton 8y ago
I’m bullish on ridesharing as a segment but bearish on uber and Lyft, simply because I think both have been run like landgrabs - large VC backed pushes to jumpstart demand and find drivers. In this case though I think the land won’t stay “grabbed”. Every driver I have seen is driving for both services and would add a third if someone told them about it and it payed equitably, so I think all the work uber and Lyft have done to make a market can be leveraged by third party competitors if they start dialing up prices to become more profitable. And I think they will need to do that to meet their valuations. This isn’t like Facebook where a larger network acts like a moat keeping competitors out. Instead, I think it actively makes a market for competitors- the friction for drivers is pretty small, and I don’t know the friction involved for getting users to download another app but I imagine it’s pretty low. Because the drivers are the same it’s a commodity, and switching between apps costs me nothing. Disclaimer: I probably don’t know what I am talking about.
- millisecond 8y ago
  I think you’re totally right, until you consider the shared/pool options. Those can be both really cheap and really profitable if you have the density.
- linkregister 8y ago
  I agree that neither riders nor drivers have any affinity toward the ride sharing platforms beyond cost and availability. That said, the incumbent in an area typically wins due to the chicken and egg problem of riders and drivers. Didi vs. Uber, Grab vs. Uber, Uber vs. Juno, etc. Lyft's market share is as high as it is because they invented the ride sharing category. Uber's market share is higher because the Uber Black service was present in more cities, so it could use its existing operations staff and rider network (and lobbying presence).
  - mattnewton 8y ago
    But the chicken and egg problem is partially solved by having lots of chickens already around laying eggs for other services. So I only have to convince people already driving to download my third-driver-app, and then riders have chickens. There is some evidence of this happening in places like Austin.
angel_j 8y ago
I'm trying to think of some way a large equity firm could make money on shares that are almost certain to go from high to low...
thisisit 8y ago
I have been reading Lyft S-1, especially their risk factor assessment. While it is full of normal warnings like limited operating history, competitors etc. One of the warnings stood out for me. Our results of operations vary and are unpredictable from period-to-period, which could cause the trading price of our Class A common stock to decline. If this is the case, I wonder how do they can they even predict their future growth? How much credence can be given to the data they present or expect about their growth?
aiisjustanif 8y ago
All of this talk sound surprising similar to airlines. - LCCs (Low Cost Carriers can come in and disrupt your fragile net profit, if you get close to it in a quarter) - Always pretty much operating in the negative. - Consumers find a lot value in the company even though the operating cost are insane. - The only way to solve the issue of airlines being in debt for years was time to slowly cut operation cost and scale, massive scale (albeit, there are a couple exceptions today now). - Local market competition in cities are hell to forecast and balance out operating cost to how profitable you can be vs competitors. Which create cities you grow dominant and via reputation and government policies. - They piss off investors because they have to trade off and invest in the operating cost (fleet or employees) some years, which can effect the companies earning for years. I get they the rideshare industry is vastly different than the airline industry in many ways (for example, oil price influencing one more than the other), but I think they are similar in important ways. Uber and Lyft will have to start taking out pages from LCCs in Europe to get ideas on how to become profitable (and probably piss off customers by nickel and diming them) and any ideas they haven't from the taxi industry that they may have over looked. Hell maybe even adapt into the rental space. I don't know the answers, but just sounds like an industry I've seen before that will have to move mountains to been profitable. Sidenote: I will not be surprised just like American, Delta, and United that Lyft and Uber will soon see government sponsored competition (China, Russia, Middle East countries) in future and be pissed because of how unfair they are because they can operate in the negative without consequences of failing.

210 points by howard941 8y ago

Sadly for Lyft I think the best comparison will be Snap. And just one look at the SNAP chart will tell you why you should avoid the Lyft IPO. It will go public at an inflated price and hold that valuation for a quarter or two and then people will start asking where either the profits or growth are and Lyft will need to start growing or erasing their huge operating losses right at the same time Uber is trying to grab as much ride share as possible gearing up to their own IPO. So at a time when the market will be starting to really pressure them to cut losses, probably by cutting the driver's portion of revenue and raising prices, Uber will be trying their best to inflate their own ride share metrics by giving drivers more and cutting ride costs. What is the story you can tell that paints Lyft as a good investment over the next 2 year period? Then there is Lyft's dual share structure will get it kicked out of many ETF's. This locked in money is a godsend to most companies as they help buoy the stock price by having locked in holders of teh stock during turbulent times. I think MSCI will put Lyft into some of its indexes given that it just put in 8-10 Chinese companies with dual listing share structures One thing I do like in Lyft's favour is that they could be a counter cyclical stock, ie they do well when the rest of the market isn't, due to people using Lyft to replace a second car or a lease that they've given up. We just haven't had a recession while ride sharing was a main stream thing. > Zimmer, Lyft's cofounder, went on to assert that private car ownership would “all but end in major U.S. cities” by 2025. Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:)

malandrew 8y ago
The US hasn't had a recession while ride sharing was a mainstream thing, but other markets have.
- pishpash 8y ago
  Car ownership will be cheaper during a recession. Driver pay can't go much lower, especially with various social proposals being put on the table for 2020.
ddingus 8y ago
He is way early. Functional, competent self driving cars are not here yet. As we get closer, I think we will find few will want to own them. Why bother? There are reasons, but those are few compared to those readons for cars we drive ourselves. We are likely to find, people will question the number of cars and share them a lot more. But that state is still a very long way off. The current slump in sales is both economic (way too many Americans buying used because new is not worth it, given tepid income) ...and a wait for EV cars to really arrive at price points worth buying new. Looks like private car ownership is on the wane, but not really, not yet. My .02
- jdsully 8y ago
  Physics says if I don’t have my own car I’ll have to wait for one. The rideshare could leave a ton in the parking lot but that negates all the projected cost savings from higher utilization.
  - ddingus 8y ago
    In most cases, having your own car will mean driving it too. I have been asking people about this. Many will just build the wait into what they do, and will count on software minimizing that with predictive behavior. Personally, I have zero desire to own a self driving car. I could potentially own one with that option, but the expense will get in the way. Just not worth it. Younger people will just adapt, meaning longer term ownership trends will not be good. Except for classic, you drive cars. Demand and value will grow nicely as people maintain them. Frankly, they will have to be legislated off the road. Well off people will own, but that will be a minority case.
    - jdsully 8y ago
      Most people like leaving crap in their car and having it ready at a moments notice. I definitely think people will want self driving cars - but as a feature in the car they buy. The exception will be those in the city where it’s a pain to find parking.
gautamdivgi 8y ago
I think the rush of IPO's may be because of some economic clouds on the horizon. Investors are probably looking to cash out while the going is good.
- bfrog 8y ago
  It's a game of hot potato, last one holding is the sucker
- linuxftw 8y ago
  It's a leading indication of recession, as is mergers and acquisitions. Easy money (credit) dries up at the end of the business cycle, companies can no longer raise capital in private markets (or traditionally, through debt), go seek money from the markets. Similarly, large companies cannot grow revenue because there are fewer startup businesses/businesses are not expanding, and to grow revenue they buy other companies.
leesec 8y ago
Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of revenue pouring in and you'd think they'd be able to dial back their rapid expansion at some point to become profitable.
- bduerst 8y ago
  Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.
  - linuxftw 8y ago
    Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
    - bduerst 8y ago
      A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
fullshark 8y ago
> What is the story you can tell that paints Lyft as a good investment over the next 2 year period? There's only one: it gets acquired
notyourwork 8y ago
> Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:) Anyone who is signing up for payment plans that stretch 6 years is crazy and buying a vehicle beyond their means.
- deleted 8y ago
  [deleted]
- rootusrootus 8y ago
  Or getting the money for cheap. At sub-2% interest I will take as much money as you're willing to lend me.
  - notyourwork 8y ago
    I'm going to guess you are an outlier in the demographic of consumers getting 6+ year car loans.
  - umeshunni 8y ago
    +1 - I got a 6 year car loan from my CU a couple of years back for next to nothing and at this point, my savings account at the same back has a 2x higher interest rate.
- thatfunkymunki 8y ago
  I got a 0% loan for a 6 year term on a new car in mid 2016. I think it was a great idea, effectively was given a discount on the car on top of the negotiated price at that rate.
  - kazinator 8y ago
    You think, but anyone who walked into that dealership with cash would have gotten a better deal on exactly the same car, and so would someone who goes for non-zero-% financing. There is no free lunch; you're not going to get a better financed deal than someone who pays and waves goodbye. There is no 0% financing without a catch.
esturk 8y ago
I don't consider car leasing to be car ownership. It's like saying leasing a house is home ownership. With that said, car leasing is on the rise. https://www.fool.com/investing/2018/06/08/why-rising-car-leases-should-worry-automakers.aspx https://www.fool.com/investing/2018/06/08/why-rising-car-lea... So Zimmer's prediction is still at play here.
- ghaff 8y ago
  Leasing is just a financing model that may have implications for how assets are carried on a balance sheet.
sp332 8y ago
Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that?
- chollida1 8y ago
  > Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that? Well Lyft ha a good product and plenty of customers and is currently being crushed in terms of market share. Wait till you hear about this company call Uber. They are 5x the size of Lyft and are capable of outspending Lfyt until Lyft is bankrupt.
- deleted 8y ago
  [deleted]
rb808 8y ago
That would just mean its a zombie company that's going down sooner or later. If making it public makes it fail quicker, that is good thing. Keeping it out of the light and pretending its a good company just prolongs the inevitable.
temporalparts 8y ago
An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that might want to get into ridesharing is long, and Lyft is the fastest (and probably cheapest if the stock tanks) path towards competing against Uber in the US market. Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc. Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc. There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.
- mrnobody_67 8y ago
  Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
  - pgt 8y ago
    A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
    - whymauri 8y ago
      I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
      - SatvikBeri 8y ago
        As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.
benatkin 8y ago
On Facebook this morning, I was shown an ad from a page called "Uber Assault", which was about a (potential) lawsuit over riders being assaulted, and there were a bunch of people chiming in that they didn't feel safe being Lyft/Uber drivers so they quit. It seems that perhaps drivers are more at risk than riders because even though the approval process for becoming a rideshare driver is very weak, it's much weaker for becoming a rider. Either way, people who had a bad experience were likely to avoid using it. I don't think Uber/Lyft is going to replace car ownership anytime soon, maybe for the six foot tall man like me but not for everybody. Another problem is waiting for a car. I got robbed once while waiting for an Uber. One solution might be to wait for the Uber driver to arrive and then go outside. I tried this once the other day, not for safety but so I could hang out with friends. The Uber left less than a minute after I got messaged, and I got charged the $5 fee, so that isn't practical. It feels safer to be walking to a bus or rail stop, or to be waiting at a stop, than it does to be standing on a corner waiting for a car. The idea that Uber/Lyft is going to replace private car ownership for everyone because it's replaced it for some is ludicrous. Public transit has done more to replace it for me (car-free by choice for 5 years) than Uber/Lyft. I usually only use Uber/Lyft when I'm in a hurry, and the cost Uber/Lyft rides just about cancels out the time savings. Self driving cars might one day replace it, but I don't think that Lyft or Uber is going to be at the forefront of it. If they are it will make me more frustrated with how the tech industry operates, because it will show that the value of investment and brand far outweighs expertise. Uber/Lyft contain a tiny fraction of the deep learning, automotive, and transportation expertise that will be needed to pull off such a thing. Finally the term "major cities" brings up the "no true scotsman" fallacy a lot. "Rent is high in major cities." Oh yeah? Dallas isn't a major city? If I don't live in a high rise downtown I'm not really living in Dallas? Eventually every major city will be eliminated in an argument and it will turn out that for the sake of the argument, there aren't any major cities in the world.
asabjorn 8y ago
I agree. In addition to this its main competitor Uber has many other business units (eats, freight, etc) and can reinvest revenue from other countries where it is the leading rideshare provider. The S1 shows that Lyft on the other hand is loosing a significant amount of money on all trips through its position as the second player in all markets its in. How is it supposed to decrease that loss?
hopler 8y ago
"major us city" is quite a weasel term. Manhattan? Queens? SF? San Jose? Phoenix? Austin?

throwaway-1283 8y ago

Basically what will happen is that in some month X after IPO the company will be forced to pull back on new driver incentives (the thing that is really making these companies bleed cash), which will slow driver supply growth, which will increase rider wait times and/or make prices spike, which will lower demand, and thus slow growth, and kill the stock price. I wouldn't touch this at all. Or short it if you're brave :)

linkregister 8y ago
If/when Lyft decides it can't grow any more, it will dump the unprofitable cities and focus on the cash cows: LA and New York, etc. The large cities are quite profitable and will be enough. That said, it's better for society if the unprofitable cities are served by competing ride sharing services. It's kind of like how the US Postal Service makes money in the cities and loses it in rural areas.

annon 8y ago

Giving the founders 20-to-1 voting rights over regular investors while losing as much money as they are is insane. This really looks like a lemon, and the VC's want to cash out and leave public investors holding the bag. I don't see how self driving cars are going to help them. Waymo and Tesla are both the farthest along, and they're going to run their own networks - competing against Lyft and Uber.

nfriedly 8y ago
I don't really disagree with you, but I think (or, at least, hope) that there will be room for more than 2-3 players in the "self driving taxi" market.
- erikpukinskis 8y ago
  The thing that would cause that is if there is some requirement for massive amounts of difficult to obtain data that is required to build a competitive system. I do think data is a competitive advantage right now. But I find it really hard to believe that 10 years from now it will be harder to build a self driving system than today. That's just not how tech is. Building YouTube was a herculean endeavor 15 years ago, but today you can hack a YouTube clone together in hours. Not just will we have more off the shelf software and hardware, but maybe you can license the data too. In the end, I don't see the moat around a self driving cab company. If someone has a good app and a single car that operates in my area, why not switch to them? Sure there are wait times and availability in odd places. But that doesn't inhibit a startup getting early adopters. You could literally just do the same commutes every day and have a profitable business. Lastly, I expect the variety in vehicles and "mobile spaces" will provide a huge landscape of opportunity that a single company will not be able to fill. Just like there is not one "housing" company, there won't be one mobile housing company either. Too much variation in taste and preference.
  - samstave 8y ago
    Personally, I think that Tesla could own the entire market, regardless of operator, if it were to develop the defacto standard rideshare vehicle, and financed it as such a % of the rideshare market. See every yellow cab in NYC, as an example, is the same make/model of car. Make a tesla Y vehicle and have the rideshare payment subsidize the car. So X% of every single ride goes to tesla to finance the car. And guess what they get as defacto: the data. Let people qualify as a driver and put down a deposit, and the car must meet a quota of rides per month, which is tracked and displayed as the car is simply a 'device' at that point... and must be used to pay it off. Tesla doesnt care where the rider bookings come from, lyft, uber, whatever. If the car is used for private purposes - then the owner is charged some function of the car's time as his "car payment" Simple.

ProAm 8y ago

The problem with both Lyft and Uber is they have MASSIVE VC investments they need to pay back, and while the business model is good its not nearly good enough to payback VC within the 10 year window. Uber will be in the exact same boat next year.

thcsa 8y ago
It's not the companies (and their earnings) who will pay back investors. Other bagholders will do that once they go public.
throwaway-1283 8y ago
What do you mean "pay back"? If you're talking about liquidation preferences those all go away in an IPO.
- ProAm 8y ago
  All the investors that 'purchased' a percentage of the private company with their investment during funding rounds will want to see ROI when the company goes public (or if the company is insanely profitable while private). Most of these VC's expect to start seeing ROI around the 10yr mark. The company isnt remotely profitable still privately held, so lets go public and get other suckers to buy in so the early investors can cash out and hopefully make a buck or two or at least breakeven.

robot 8y ago

I get a lot of promotions from lyft that make me think they're desperate.

sumitgt 8y ago
I think it's just part of the blitzscaling process.
Invictus0 8y ago
They're not really promotions. All those 20% off emails only give you 20% off Lyft's fee, not the whole fare. It saves you a total of maybe $2 on an average ride.
- popz41 8y ago
  I disagree, my email yesterday said "50% off your next 10 rides. You have 10 rides remaining. Max savings of $6 per ride. Discount applies to the fare, Prime Time charges, Service fee, tolls, and taxes only."

throwaway082729 8y ago

Once Waymo has fully autonomous vehicles on the road, they'll look to acquire Lyft for a decent price. Lyft has the brand value and the infrastructure for ride calling (intentionally not using ride sharing) except that drivers will no longer be needed. Profits will be through the roof when that happens.

leesec 8y ago
There are 1.4 million Lyft drivers in US and Toronto. Waymo is going to buy and retrofit and provide 1.4 million cars?
- i_cant_speel 8y ago
  Those 1.4 millions drivers aren't all driving at the same time. They would only need a fraction of that many cars and they could be built over an extended period of time.
  - throwaway082729 8y ago
    Exactly. Also, having self-driving cars does not mean that you only have self-driving cars in your fleet. They could still employ drivers strategically (in areas where demand is high which in turn will increase profitability and distribution to drivers) while using self-driving cars for commutes.
    - sigstoat 8y ago
      > ...(in areas where demand is high... or areas/weather conditions which they know are difficult for their autonomous cars to navigate.
  - leesec 8y ago
    OK so Waymo is going to buy and retrofit and provide 500k cars?
    - 8y ago

willart4food 8y ago

Well same for Uber and we all knew that. It's just the business model (for now). So, in a world where we are all used to Uber/Lyft and there's no turning back, the only way forward is for fares to go up, close to - if not the same - to conventional cab fares. Which will decrease usage, which will decrease the size of Uber/Lyft and therefore their market cap. Sounds like 1999

ghaff 8y ago
I honestly, albeit naively, expected that when Uber put in a new CEO, they’d take that opportunity to raise prices to break even levels which presumably end up around where taxis are. Take the volume hit; customers who are only interested in VC-subsided rides aren’t customers you want. But I guess everyone decided to continue to pretend that the current business is sustainable.
- djsumdog 8y ago
  They're probably still holding on to the dream of the self driving vehicle ... which is practically at least 15 years out at this point .. probably more like 20~25.
  - ghaff 8y ago
    Note that holding onto a dream and making public statements to sucker investors are not necessarily the same thing. I agree with your basic point, especially in the areas dense enough to make taxi-like services work well.
- willart4food 8y ago
  It's an interesting "Game Theory" type game. The VCs keep finding Uber/Lyft because... they have a lot invested already, and the paper valuation is high; but each round is higher and higher stakes. Once these unicorns IPO's, after the lock-up period the VCs are somewhat free to exit (be careful about dumping). Once IPO'd and the VCs are out, who cares if they crash and burn! But on the consumer side, we're used and hooked to the Uber/Lyft experience and prices. The experience can be duplicated with tech, the prices... not so much. Here's an interesting blowback twist: let's say that on unrelated news TSLA crashes (I am a TSLA investor, so.. not wishing it), it would have ripple effect on the entire tech segment, closing the IPO window for a while. So, then what for Uber/Lyft? We live in interesting times!

pochamago 8y ago

What are the big expenses that cost Uber and Lyft so much? The driver takes the cost of owning and maintaining the vehicle, and they're only paid a fraction of whatever rides they get. Aren't the companies just running an app?

deleted 8y ago
[deleted]
mosdl 8y ago
They hired a lot of engineers working on internal stuff. Probably will have a large layoff round to reduce costs.
- EpicEng 8y ago
  They don't lose billions each year on engineering. Not even close.
lhorie 8y ago
Biggest expenses are keeping driver supply high in new cities until the service adoption gets traction among consumers, and customer support / fraud mitigation (again, primarily in new cities). For the most part, established cities are profitable (at least for Uber, I don't know the story for Lyft).
- pochamago 8y ago
  That makes sense, but it makes me skeptical, then, of the article's claim that they have no path to profitability.
  - Sohcahtoa82 8y ago
    Many investors are extremely short-sighted.
  - lhorie 8y ago
    The better analyses I've seen say that Lyft could be profitable, if they stopped subsidizing growth via their profit centers, but then they have to somehow overcome the one-trick pony problem and it's not very clear how. Uber, on the other hand, has several verticals, and also enough muscle to be able to strike profitable deals w/ local competitors, as it has already done in various countries.

samstave 8y ago

What level of equity are Uber and Lyft drivers given in the company? Any? Are they "earning shares per mile" or anything like that? If not - then screw both companies, and I hope they do poorly in the IPO -- even though ridesharing is such a wonderful service - I really hope they do right by the literal foundation of their existence, which is the drivers.

kbutler 8y ago
How much of their cash compensation should come in the form of stock instead?
EpicEng 8y ago
That seems completely unreasonable. Lyft contracts with more than 700k drivers. How in the world could they give each driver a meaningful share of options while also maintaining a controlling interest in the company? Let's also be real here; the supply of drivers is endless. It's about as far from a skill position as one could imagine. Would you be ok with their pay being decreased as well?
- Marsymars 8y ago
  > How in the world could they give each driver a meaningful share of options while also maintaining a controlling interest in the company? Not commenting on the practicality, but when choosing between traditionally cab companies, I preferentially go with ones that are driver/employee owned.
ptero 8y ago
Giving drivers equity in the highly speculative company strikes me as a strange requirement. It may be attractive to some, but irrelevant for others. If I worked for Lyft or Uber I would much prefer any earned money given to me in cash which would let me decide what I want to do with this money: invest in IPO or post-IPO shares, invest elsewhere or spend it on something different. My 2c.
plink 8y ago
They shouldn't for the same reason that McDonalds doesn't give equity to cows.

fargo 8y ago

Would it be wise for someone to go work for lift given this information? Asking for a friend...

lukewrites 8y ago

I think both Lyft and Uber are pursuing IPOs because the private market has soured on them. The VCs want to get their payout and are starting to fear a down round…so the companies will go public, the investors will get their payouts, and whoever buys will eventually regret it.

Animats 8y ago

"The dual class structure of our common stock has the effect of concentrating voting power with our Co-Founders, which will limit your ability to influence the outcome of important transactions, including a change in control. Our Class B common stock has 20 votes per share, and our Class A common stock, which is the stock we are offering by means of this prospectus, has one vote per share." No-voting-power stock for a company that's losing money? No. Companies that have done that before, such as Google and Facebook, were profitable before the IPO. That's when you want to keep the management team. With Lyft's numbers, firing the current management might not be a bad idea. They've had their growth phase; now they need to move to profitability. If you haven't read an S-1 before, you skip all the happy talk and go directly to "Consolidated Statements of Operations".

djsumdog 8y ago
To be fair, I doubt any management could make ride-sharing companies profitable. The sooner they go under, the sooner drivers start making livable incomes again.
- dnautics 8y ago
  > The sooner they go under, the sooner drivers start making livable incomes again. Have you actually been a driver? I can assure you that having been one, in the Bay area, even, the income was quite livable.
  - i_am_nomad 8y ago
    There’s the common impression - misconception? - that driving for rideshare companies is a losing game, and that drivers end up making very little money after fuel, repairs, and depreciation. For a while, it seemed like every day there was another article breaking this down and “exposing” Uber and Lyft. Having never driven for them, I can’t verify whether this is true, but just a quick back-of-the-envelope guess seems like drivers in the Bay Area could average $40 - $50 an hour. That doesn’t seem like minimum wage level to me.

djsumdog 8y ago

Lately my phone will die at 30% charge. I've ordered a new battery but last week it went out while I was looking for a Lyft. I normally don't use taxis but it was cold and I was tired. Luckily I was near a train station and it was still early enough the buses were running, so I knew which transfers to make and which bus to get on without needing a map. Still I thought about how only a decade ago, I could be on this same street and hold up my hand and flag down a Taxi. Today if I really wanted a taxi, they're pretty much only in the city. I'd have to hunt around for a payphone and would need change too. If I didn't know my public transport routes back home or if it was late enough the trains stopped running, I'd be kinda SOL. I realize Taxis not just driving around saves on fuel consumption, but have we lost something by simply not being able to hail a cab without a charged phone or laptop with a Wi-Fi point? I wonder if Uber or Lyft will start putting out kiosks people can use to flag down rides when their phones or out.

RomanPushkin 8y ago
Yes, we've lost it. However, it can be fixed. I created app so everyone can be a taxi driver. It's PoC, but actually works. There are tons of problems, no critical mass, security. But anyway, I was once able to find a ride back home from San Francisco. This app is for everyone at https://libretaxi.org https://libretaxi.org (non-profit, open source) Disclaimer: I'm founder
- coolspot 8y ago
  Interesting that your app is Telegram bot instead of separate application. Will try it given the chance.
- jon-wood 8y ago
  As much as I love to see Open source solutions to problems having looked at the website this seems like a disaster waiting to happen without any sort of driver vetting. You’ve effectively made an app where people can broadcast to random strangers that they’re waiting around in the street, carrying cash, and far enough from home to need a lift. Sadly we don’t live in a world where something like that isn’t going to be flooded by people with ideas other than making a few bucks driving people home.

pastor_elm 8y ago

Three words: Ads, ads, and ads. Ads is how you make money. All lyft needs to do is incorporate ads into its platform and it will start printing money.

tgeo 8y ago
At this point I'm convinced this is a troll account

justfor1comment 8y ago

For me the saddest thing is that even if Lyft stock tanks after the IPO the founders Zimmer and Green will have very little impact to their personal finances. The founders along with the investors will be able to move most of their stock through the markets making them billionaires. It's mostly the Lyft employees stuck in the post IPO lock up period who will be hurt by the dip in stock value. Another reason why the rich keep getting richer.

puranjay 8y ago
Isn't the founders' holding severely diluted? They've gone through, iirc, over a dozen rounds of funding and own very little in the company
- Sohcahtoa82 8y ago
  Even owning 1% of a $15B company still makes you worth $150 million. Dumping even 2% of that $150M would give you enough to retire.
  - draw_down 8y ago
    Yeah. A billion here, a billion there, pretty soon you're talking about real money.
  - ztratar 8y ago
    3M is not even close to enough for retirement in Silicon Valley. Also... 1.6M after taxes.
    - Kye 8y ago
      I thought the usual track was Move to SV -> Get rich -> Retire somewhere cheaper. ~1 million is plenty almost anywhere on the planet. Especially if they go the FIRE route.
      - opportune 8y ago

popz41 8y ago

In the past two weeks I've been receiving offers for discounted rides from Lyft. First was 30% off for a week, then yesterday I received a code for 50% off this week. It seems they're trying to inflate their ride numbers quickly. I have not received any promotions prior to this, and I've been a member for over a year.

scottnyc 8y ago
No question. It's pretty evident they are aggressively spending on acquisition to boost their top line numbers. Timing wise, this effect will probably show up after they IPO and for their first publicly reported earnings announcement. Which will hopefully keep the stock price high long enough for the employee lock-up to expire.
FireBeyond 8y ago
Every day for the past week I've got a "$5/$10 off your next ride" discount email. They all have different codes and expiry dates, so absolutely they're doing this, considering it's the first time in multiple years I've gotten any such thing.

ChuckMcM 8y ago

Yeah. And while this says a lot about Lyft, for me it really really says a lot about Uber too. It has never been impossible to run a company by injecting money into it to cover the difference between how much customers 'value' the product versus what it costs to provide the product. But the dot com days showed that without a point in the business model where the value exceeds the cost by enough margin to keep the business going, such businesses don't survive. What neither Lyft, nor Uber, has yet provided is a credible 'size' at which they would be a going concern (covering all their costs), nor a really good idea of how being larger scales revenues more than costs in sufficient measure to become profitable. I would love to see a document that describes the 'per driver' costs that these companies incur on a location basis (so costs per driver in Los Angeles CA, and per driver in Minot ND) vs revenue expectations per driver vs total available livery miles (how many people would have to want to go somewhere to support those numbers). Then you could at least see if there were any islands of profitability in that solution space. So far, I've yet to see anything where the answer is net positive. Worse, any positive solution will be very fragile by definition because the barrier to entry is zero and so a third party can unilaterally drain profits out of a ride share company by starting up an unprofitable competitor and funding it out of pocket until it has done the required amount of damage.

bunderbunder 8y ago
To your last point, my read on the history of taxis in the USA is that that was roughly what was happening during the early 20th century, until some regulation came along to create artificial barriers to entry. Uber broke down those barriers to entry, which allowed them to disrupt the incumbent taxi companies. But it also means that there's not much to protect them from being disrupted themselves. The taxi situation in most cities was awful before rideshare came long, and the taxi cartels' rent-seeking behavior produced produced some gross externalities (the lack of any train lines going to LGA comes to mind), so this has perhaps been a net benefit to consumers. But Uber and Lyft are not charities, and that fact has no bearing on their viability as businesses.
- xvf22 8y ago
  The lack of any meaningful rail / subway connection at LGA is something I have to deal with on a regular basis. Probably won't change anytime soon either which is unfortunate.

jeffdavis 8y ago

This article seems excessively negative about a company: * Which provided $8B worth of rides in a single year * Didn't hurt anyone For crimes which amount to: * May cost some IPO underwriters money * May not make all of the employees rich * May cost VCs money The worst thing to really say about such a company is "I enjoy their convenient rides but I won't buy their stock". Instead, the article attacks the founders for their age (too young), ridicules their visions of the future, and compares them to other young founders. Bewilderingly, the author compares the founders to Zuckerburg, which doesn't fit the point of the article at all. Not content with all of that, the author takes a shot at Musk for selling fantasies, when he has done more than many people thought possible.

themagician 8y ago
Didn't directly hurt anyone in an easily quantifiable way. It's not clear that Uber or Lyft are net positives to society. They are disruptive, but not necessarily in a good way. Yes, they provided $8B worth of rides. But before that people still got around. What the world might have been like without Lyft is impossible to know, but the way it's changed the job landscape isn't exactly a huge net positive. It's put a lot of cars on the road and it's set to new "floor" for jobs in general. Uber, Lyft, Taskrabbit, DoorDash have created a new kind of serfdom. I'm not saying it's a bad thing, necessarily, but I wouldn't say that they didn't hurt anyone. They definitely hurt social progress.
- googlemike 8y ago
  They (Uber and Lyft) radically reduce drunk driving in every city they enter. They also radically simplify access to transportation for people of color, women, etc.
  - amanaplanacanal 8y ago
    > They (Uber and Lyft) radically reduce drunk driving in every city they enter This is cool if true. Does it show up in accident statistics?
- 8y ago

badinsie 8y ago

they are the literal definition of a parasite how are they not profitable?

duderific 8y ago

I would gladly pay more than a cab to continue to have the convenience of being able to get a ride when and where I need it. I remember back in the pre-rideshare days, trying to call a cab ahead of time, and having them simply not show up, with no warning or notification.

mattnewton 8y ago

I’m bullish on ridesharing as a segment but bearish on uber and Lyft, simply because I think both have been run like landgrabs - large VC backed pushes to jumpstart demand and find drivers. In this case though I think the land won’t stay “grabbed”. Every driver I have seen is driving for both services and would add a third if someone told them about it and it payed equitably, so I think all the work uber and Lyft have done to make a market can be leveraged by third party competitors if they start dialing up prices to become more profitable. And I think they will need to do that to meet their valuations. This isn’t like Facebook where a larger network acts like a moat keeping competitors out. Instead, I think it actively makes a market for competitors- the friction for drivers is pretty small, and I don’t know the friction involved for getting users to download another app but I imagine it’s pretty low. Because the drivers are the same it’s a commodity, and switching between apps costs me nothing. Disclaimer: I probably don’t know what I am talking about.

millisecond 8y ago
I think you’re totally right, until you consider the shared/pool options. Those can be both really cheap and really profitable if you have the density.
linkregister 8y ago
I agree that neither riders nor drivers have any affinity toward the ride sharing platforms beyond cost and availability. That said, the incumbent in an area typically wins due to the chicken and egg problem of riders and drivers. Didi vs. Uber, Grab vs. Uber, Uber vs. Juno, etc. Lyft's market share is as high as it is because they invented the ride sharing category. Uber's market share is higher because the Uber Black service was present in more cities, so it could use its existing operations staff and rider network (and lobbying presence).
- mattnewton 8y ago
  But the chicken and egg problem is partially solved by having lots of chickens already around laying eggs for other services. So I only have to convince people already driving to download my third-driver-app, and then riders have chickens. There is some evidence of this happening in places like Austin.

angel_j 8y ago

I'm trying to think of some way a large equity firm could make money on shares that are almost certain to go from high to low...

thisisit 8y ago

I have been reading Lyft S-1, especially their risk factor assessment. While it is full of normal warnings like limited operating history, competitors etc. One of the warnings stood out for me. Our results of operations vary and are unpredictable from period-to-period, which could cause the trading price of our Class A common stock to decline. If this is the case, I wonder how do they can they even predict their future growth? How much credence can be given to the data they present or expect about their growth?

aiisjustanif 8y ago

All of this talk sound surprising similar to airlines. - LCCs (Low Cost Carriers can come in and disrupt your fragile net profit, if you get close to it in a quarter) - Always pretty much operating in the negative. - Consumers find a lot value in the company even though the operating cost are insane. - The only way to solve the issue of airlines being in debt for years was time to slowly cut operation cost and scale, massive scale (albeit, there are a couple exceptions today now). - Local market competition in cities are hell to forecast and balance out operating cost to how profitable you can be vs competitors. Which create cities you grow dominant and via reputation and government policies. - They piss off investors because they have to trade off and invest in the operating cost (fleet or employees) some years, which can effect the companies earning for years. I get they the rideshare industry is vastly different than the airline industry in many ways (for example, oil price influencing one more than the other), but I think they are similar in important ways. Uber and Lyft will have to start taking out pages from LCCs in Europe to get ideas on how to become profitable (and probably piss off customers by nickel and diming them) and any ideas they haven't from the taxi industry that they may have over looked. Hell maybe even adapt into the rental space. I don't know the answers, but just sounds like an industry I've seen before that will have to move mountains to been profitable. Sidenote: I will not be surprised just like American, Delta, and United that Lyft and Uber will soon see government sponsored competition (China, Russia, Middle East countries) in future and be pissed because of how unfair they are because they can operate in the negative without consequences of failing.