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Notes 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 b

Notes 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 ago
Can you explain the "float" observations and argument?
- chollida1 8y ago
  Sure, 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.
  - shereadsthenews 8y ago
    I'll be really surprised if they go 3 years before another offer.
koolba 8y ago
> valued at 10x 2018 revenue, wow, given the losses, wow. Well it would have to be some multiple of revenue as a multiple of profits wouldn’t make any sense (as its negative). Still though that’s nuts!
- spikels 8y ago
  For growth companies equity analysts look at forward ratios - projected several years out. 10x in 2018 will probably be 5-6x in 2019 and 3-4x in 2020 and maybe 2-3x in 2021. Still very high but at least approaching sane levels.
dmode 8y ago
Isn't 10x revenue pretty standard for late stage startups ?
- ithinkinstereo 8y ago
  Yes, but usually software startups with high profit margins and cost structures that benefit from economies of scale.
raiyu 8y ago
The float is typical and not small as it is basically all of the shares that are issued for the actual fund raise portion of the IPO. Aside from that the only other shares that can be traded are those that aren’t under lockup, and given that the majority of shares are owned by investors, founders, and employees there are always restrictions there for a minimum of 6 months.
- chollida1 8y ago
  > The float is typical and not small as it is basically all of the shares that are issued for the actual fund raise portion of the IPO Lets agree to disagree. Snap for instance went public by listing 200M shares out of around 1B so 20%. Under 10% of float trading is, historically speaking, small. Lyft went public with 32M shares out of 273M or 8%. 8% is a relatively small float, Groupon tried something similar. The rest of your comment I agree with. Here is a piece you can use to learn about IPO's and floats https://outline.com/BTx8KT https://outline.com/BTx8KT > The percentage of companies sold in U.S.-listed IPOs has overall come down over the past 20 years, though not dramatically, according to Dealogic figures. From 1995 to 1997, the average company sold 36% of its shares to the public. In the last three years, the average was 27%. > This year, 27.7% of shares have been sold in the average IPO. That is up slightly from last year, when 27.3% of shares were floated in IPOs.
deleted 8y ago
[deleted]
jgalt212 8y ago
> Uber had better IPO this year. Since Powell lost his nerve, and completely rolled over for the investor class, I think you'll see more IPO's than you can shake a stick at in the very near future. The banker's have realized the IPO Market is wide open (for now!), and better make hay while the sun shines.
- moneywoes 8y ago
  I'm not the brightest. What Powell are you referring too?
  - mikeyouse 8y ago
    From context, I think that's shorthand for the Federal Reserve who's currently chaired by Jerome Powell. https://en.wikipedia.org/wiki/Jerome_Powell https://en.wikipedia.org/wiki/Jerome_Powell
pmart123 8y ago
A small float makes a lot of sense now. With much of the market now investing in a quasi passive fashion, or systematically, these strategies will not buy an IPO. In fact, many of these strategies require several reporting cycles.

gristle 8y ago

Can you explain the "float" observations and argument?

chollida1 8y ago
Sure, 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.
- shereadsthenews 8y ago
  I'll be really surprised if they go 3 years before another offer.

koolba 8y ago

> valued at 10x 2018 revenue, wow, given the losses, wow. Well it would have to be some multiple of revenue as a multiple of profits wouldn’t make any sense (as its negative). Still though that’s nuts!

spikels 8y ago
For growth companies equity analysts look at forward ratios - projected several years out. 10x in 2018 will probably be 5-6x in 2019 and 3-4x in 2020 and maybe 2-3x in 2021. Still very high but at least approaching sane levels.

dmode 8y ago

Isn't 10x revenue pretty standard for late stage startups ?

ithinkinstereo 8y ago
Yes, but usually software startups with high profit margins and cost structures that benefit from economies of scale.

raiyu 8y ago

The float is typical and not small as it is basically all of the shares that are issued for the actual fund raise portion of the IPO. Aside from that the only other shares that can be traded are those that aren’t under lockup, and given that the majority of shares are owned by investors, founders, and employees there are always restrictions there for a minimum of 6 months.

chollida1 8y ago
> The float is typical and not small as it is basically all of the shares that are issued for the actual fund raise portion of the IPO Lets agree to disagree. Snap for instance went public by listing 200M shares out of around 1B so 20%. Under 10% of float trading is, historically speaking, small. Lyft went public with 32M shares out of 273M or 8%. 8% is a relatively small float, Groupon tried something similar. The rest of your comment I agree with. Here is a piece you can use to learn about IPO's and floats https://outline.com/BTx8KT https://outline.com/BTx8KT > The percentage of companies sold in U.S.-listed IPOs has overall come down over the past 20 years, though not dramatically, according to Dealogic figures. From 1995 to 1997, the average company sold 36% of its shares to the public. In the last three years, the average was 27%. > This year, 27.7% of shares have been sold in the average IPO. That is up slightly from last year, when 27.3% of shares were floated in IPOs.

deleted 8y ago

[deleted]

jgalt212 8y ago

> Uber had better IPO this year. Since Powell lost his nerve, and completely rolled over for the investor class, I think you'll see more IPO's than you can shake a stick at in the very near future. The banker's have realized the IPO Market is wide open (for now!), and better make hay while the sun shines.

moneywoes 8y ago
I'm not the brightest. What Powell are you referring too?
- mikeyouse 8y ago
  From context, I think that's shorthand for the Federal Reserve who's currently chaired by Jerome Powell. https://en.wikipedia.org/wiki/Jerome_Powell https://en.wikipedia.org/wiki/Jerome_Powell

pmart123 8y ago

A small float makes a lot of sense now. With much of the market now investing in a quasi passive fashion, or systematically, these strategies will not buy an IPO. In fact, many of these strategies require several reporting cycles.