8 ms·
Lyft pops 21% on its first day of trading
- chlvsl 8y agoThe first day of trading is not even halfway done. Please do not post sensationalized articles.
- jak92 8y agoMight be a bit premature to write these headlines? The day isn't over. At least that's a benefit of printed papers.
- harveywi 8y agoThe bigger question will be how Lyft handles the markets longer term, whether it continues to rise or faces the "Snap" effect.
- giancarlostoro 8y agoThe term is market correction. https://en.wikipedia.org/wiki/Market_correction https://en.wikipedia.org/wiki/Market_correction
- nerdkid93 8y agoI thought it was shocking since yesterday the rumored price was $72. That's a pretty big disparity.
- kenneth 8y agoThe price that Lyft sold newly issued shares at yesterday was $72. They raised $2B at that price. Some of those investors put up their new shares into public markets this morning and got a handsome profit.
- gtr32x 8y agoI'm curious how true this is, don't they have lock-up periods? Would love to get educated here if that's not the case or there are exceptions.
- shereadsthenews 8y agoNo, when you buy shares in an IPO they are yours immediately. Otherwise where would the liquidity come from?
- raiyu 8y agoThe lockup period is for existing shares that affect employees, founders, and prior investors. The new shares that are issued and then sold at the IPO offering price are able to be traded immediately and this is where the volume comes from. In order to be a buyer of an IPO you need to have a tremendous amount of net worth, think 10’s of billions of dollars, you need to have a relationship with a bank, and you need to subscribe to all of the IPOs on the calendars, not just cherry pick the ones that you want. The entire IPO process is really a very limited market place to a very select few buyers and these are typically very large endowments, mutual funds, and so forth. In order to assure the company that they have buyers, they promise a return to those buyers in the price popping immediately after the IPO, otherwise the IPO pricing loses it’s allure. In a Dutch auction, typically new shares aren’t created, and instead existing investors sell shares. This means that the company doesn’t get any of that cash on it’s balance sheets. This is done when the company is profitable, or has enough cash reserves to become profitable in the near future and the investors then want to get all of that pop by offering those shares directly. Now for investors in a regular IPO, it’s also ok for investors, because while the company gets a bit less cash on its balance sheet, the investors shares are valued immediately on the public market and have the benefit of the pop. With the idea being that they will retain this higher value post the 6 month lock up. However, you will already have two sets of quarterly results typically in that window in which case Wall Street will continue to evaluate the stock. If you can hit your projections you will be in good shape, however, if there are any misses, as was the case with Snap, all of that exuberance was tied to impossible numbers so the reset can be quite harsh. And in public markets, that reset is instantaneous, because as soon as the news hits the market cap is immediately affected as shares are then traded on this news.
- shereadsthenews 8y agoWell, isn't the "pop" the delta between the offering price and the opening trade? You don't need a close for that.
- fullshark 8y agoIt's a developing story that you don't need to follow, but a lot of stock market analysts are likely very curious how it goes today for Lyft.
- warp_factor 8y agoThe stock is in free fall right now. It popped because it was so much hyped accross regular investors. Right now I predict that one week from now it will go under the 72$ opening price
- mr_spothawk 8y ago10 hours later and its 8.74%
- ra7 8y agoAnd they are down 5% from that $87.24 pre-market price.
- slap_shot 8y agoObligatory: underwriters usually price IPOs at a discount (called "underpricing") and preferred investors get the benefit of that in this early "pop."
- dman 8y agoAlso the reason you pay underwriters is to engineer the pop, so underpricing might not be all there is to it.
- alexpetralia 8y agoHm isn't it the listing firm who pays the underwriters? Why would they want to "engineer" a pop? The bigger the pop between the listing price and what the price settles at, the less cash the listing firm raised relative to what they could have raised. Even existing shareholders don't really benefit from a pop because they would be able to sell at the "true" market price that the listing firm _should have raised_ at, as well as the true marketing price that the price eventually reaches. The only people who benefit are those who got in between the listing price and the closing pop price - at the expense of the listing firm.
- huac 8y agoso they can get headlines like "lyft pops 21%", that's great publicity
- alexpetralia 8y agoThe question of course is how much it costs! :)
- 1024core 8y agoIf you really want to get the full market value out of your IPO, you should use something like a Dutch Auction https://www.investopedia.com/terms/d/dutchauction.asp https://www.investopedia.com/terms/d/dutchauction.asp IIRC Google did that, and didn't experience a first-day pop. The company sells its shares to the underwriter at the IPO price; so the company gets the money up front from the underwriter. It is in the company's interest to price it as high as it can; and in the underwriter's interest to price it as low as it can. If the underwriter wins, you see a pop; if the company wins, you see flat or a decline. This is why a Dutch Auction is the best option for IPOs, but underwriters hate that (insert "the underwriters hate him!" meme).
- sharemywin 8y agoHow long until all the insiders can sell their stock?
- kenneth 8y agoSix months
- arcticbull 8y agoUsually 6 months, occasionally 12, and the leadership may have a longer blackout window
- vkou 8y agoThat's for employees, what about insider investors?
- sharemywin 8y agoI got down-voted for asking a question? Like maybe I want to wait to buy the stock and might want to wait until the insiders sell. Since most IPOs have a drop after the insiders sell.
- chollida1 8y agoNotes about the IPO I've been collecting.... - Opens at $87.24, IPO at $72.00 - raised about $2.34 Billion in cash - unlike hte SNAP IPO, this one has some buy ratings - lock up date of Sept 2nd - company valued at $25Billion, though note the financial engineering of a relatively small float that helps push up the stock price. - upsized offer from 30.8M shares to 32.5M( around 11% of float, this is a relatively small float) Groupon tried this kind of financial engineering to prop up a bad business, it didn't go well then - valued at 10x 2018 revenue, wow, given the losses, wow. - CEO won't talk about how they'll become profitable, now that they are out of the IPO window that's a bit of a worrying trend, though clearly Wall St doesn't seem to currently care - no international expansion plans outside of Canada > "We may choose to do that some day but we don't have current plans." -now trading below its opening trade, not to be confused with its opening price. Uber had better IPO this year. By Year end Lyft will have reported 3 times so investors will start to look for losses to shrink and see a path to profitability. Lyft Share lock ups will also be off so Lyft will get some selling pressure. If Lyft can't support the high valuation it currently has 9-12 months out then Uber had better have a better story than "we're Lyft but bigger". I'd expect to see an S-1 from uber in April and an IPO by the end of the summer to avoid this scenario.
- gristle 8y agoCan you explain the "float" observations and argument?
- chollida1 8y agoSure, short answer is supply and demand. Longer answer is that by only allowing a small float to trade, you have artificially limited the number of shares available(supply). All other things being equal, a small float leads to a higher share price as people will have to pay more to get shares if they want them. Now, this will come to a head as eventually large holders and employees will be allowed to trade their shares, thus increasing the supply of shares. Also given Lyft has no assets to use as collateral against a debt issuance and I'll work with the assumption that they'll need to raise money again given the losses Lyft will probably issue new shares again in the open market(secondary offering) within 3 years(this is my opinion) further increasing hte supply of shares. This will obviously increase the supply of shares available and, as micro economics teaches us, lower the price per share. Now you'll start to think something about efficient markets and shouldn't this be priced in. And the answer is yes, kindof. But the truth is that looking at historical chats you can often identify the times when share came off restriction by the dip in the chart leading up to those days. Think of it like the bitcoin price, most people aren't factoring in coins that we assume are lost or ones that belong to satoshi from his/her initial mining. If all of those btc hit the market, even in a slow and orderly way, the price of BTC, all other things being equal, would go down.
- nickvanw 8y ago$SNAP "popped" 40% when it IPOed: https://money.cnn.com/2017/03/02/technology/snapchat-ipo/index.html https://money.cnn.com/2017/03/02/technology/snapchat-ipo/ind... It now trades at less than half of that.
- azinman2 8y agoI can’t remember... had Instagram ripped all their features at that point?
- minimaxir 8y agoThe Snap S-1 noted slower DAU growth due to Instagram.
- techntoke 8y agoEveryone with a little bit of objectivity knew they were way overvalued. However, I remember the inauthentic PR machine kept pushing them everywhere.
- warp_factor 8y agoVery similar to Lyft and Uber it seems
- scarejunba 8y agoNah, that's just hindsight bias because loads of people claiming objectivity thought that about FB too. And they were crowing when FB hit 16. But they were wrong all throughout.
- harveywi 8y agoThe term is market correction. https://en.wikipedia.org/wiki/Market_correction https://en.wikipedia.org/wiki/Market_correction
- cjeane 8y agoor Dumb Money, depending on your position
- abhinai 8y agoCan some kind soul please explain to me why popping on the first day is considered to be a good thing? Isn't the company leaving the money on the table for investment banks and their rich clients if they do not sell their shares at an optimal price?
- SpicyLemonZest 8y agoThe window immediately after IPO is the first reliable source of information about how much the general public actually wants to buy Lyft stock. So if shares jump 21% upon gathering that information, it doesn’t necessarily mean the IPO price should have been 21% higher.
- sidr 8y agoThat's exactly what it means. Nobody wants to buy Lyft stock. People only want to buy Lyft stocks at particular prices. Turns out the equilibrium price was 21% higher than the offering price.
- mLuby 8y agoI agree it's leaving money on the table for the company, but I believe that investment banks' rich clients get to buy at the IPO price, so the "pop" is an immediate bonus for those clients. Bad for the company (which would hope for 0% pop) but good for the banks and their clients. I imagine that for companies not using banks, there's less incentive for this?
- iandanforth 8y agoYou are correct. This is why Google went with the dutch auction IPO. However the underwriters (banks) that manage the IPO desire a pop to make the venture worth while and thus have actively cultivated the idea that popping is a signal of value.
- cjeane 8y agoPrivileges of running the IPO. The bank needs to leave upside room for its "best" customers. The company wants to be fully booked and raise as much as possible. It's a balancing act for both sides, with non perfect information.
- gvand 8y agoDon't all the IPO usually pop on the first day? Just to get back to some lower level in the following days.
- pishpash 8y agoWhat's the volume? Let's not get fixated on the price when volatility is high. Mean vs variance yo.
- v64 8y agomy broker is showing 57.9m shares traded as of 2:52pm Eastern
- hackin247 8y agoThis is a tough business to be in and it's probably not recession proof. Good thing for them to raise all that cash so they get a longer runway if the economy goes south.
- mruts 8y agoSeeing that IPOs are designed to pop, I don’t find it that surprising. The naive way to look at an IPO that pops the first day of trading is that the investment bankers left a lot of money on the table and the company got screwed. But if an IPO was set at a fair price (the price after the first day of trading), the company might have a hard time generating the pre-IPO demand in the first place for their roadshow. After all, the only reason to subscribe to an IPO and get pre-allocated shares is to make some juicy risk-free returns. So the company makes the explicit choice to trade off short-term profits for short-term (but hopefully longer) artificially induced demand. The bankers win by allocating shares to investors they like hoping that the favor will be returned in the form of business in the future (on top of the fat fee they make). The subscribed investors win by the risk-free return. The company wins be inducing demand. This has been the process and the incentives that have governed IPOs for a long long time. It’s interesting that this process might be supplanted with direct listings or auctions ala Spotify or Google.
- deminature 8y agoIt's absolutely surprising considering the last private price is less than half of the publicly trading price.
- mruts 8y agoMaybe the dotcom bubble is a bad example, but 50% or more pops were pretty common.
- icedchai 8y agoToo bad no retail investor got this pop.
- veryworried 8y agoI don't know about anyone else, but I'm prepared to open up a huge short position when Lyft gets to about 90. No way this thing will keep going up.
- sombremesa 8y agoLooks like you'll have to wait a long time.
- gumby 8y agoThe underwriters should have priced the deal higher so the company would have more money to invest. Pop is a handout to favored clients of the underwriters (or a subsidy to encourage them to subscribe). It's like the VCs having the company pay its legal bill when doing a deal: less of the LP's money for the company to invest, while they get to pocket the money the LPs did give the firm for this purpose (management fee -- the 2% of "2 and 20"). And the press describes the pop as a good thing. It's underwriter malpractice.
- deleted 8y ago[deleted]