4 ms·

> Lyft’s stock market debut has set up its founders, employees, early backers and even those who scored shares in the initial public offering Thursday night for

> Lyft’s stock market debut has set up its founders, employees, early backers and even those who scored shares in the initial public offering Thursday night for quite a windfall. ... not really? Most of those folks are locked out for several more months and can't sell -- at which point the stock may suffer increased selling pressure, much like Snap. These folks are no more successful now than they were a week ago. Also the IPO price was $72 -- and Lyft is selling at $69 right now, so, no, the institutions that bought the IPO are not having a windfall at present. (But now I see this article was published Friday, before today's continued decline, so I see why this made it past the fact checkers.) I found this simple graphic a great distillation of why Lyft and Uber may be considered overvalued: https://i.imgur.com/z1aCZaX.png https://i.imgur.com/z1aCZaX.png

alexpetralia 8y ago
> the institutions that bought the IPO are not having a windfall at present. This of course depends on when they sell, or sold!
- deleted 8y ago
  [deleted]
deleted 8y ago
[deleted]
ummonk 8y ago
I’d be curious how much stock the IPO institutions sold after the opened. Do they tend to hold on to most of their stock for a long time? It could be that a bunch of people who were unable to participate in the IPO but bought the stock when it became listed on the market and popped were the main losers. Also, that graphic doesn’t make Uber and Lyft seem all that overvalued - does it really seem unusual for Lyft to do as well financially as Delta?
- JumpCrisscross 8y ago
  > does it really seem unusual for Lyft to do as well financially as Delta? Delta's operations threw off $7 billion of cash in their FYE 2018 [1]; Lyft's burned over $280 million [2]. In the same period, Delta's net income was almost $4 billion [a] while Lyft lost over $900 million. Lyft is not doing as well financially as Delta. Instead, its investors are betting that it will--in the future--do much better than Delta is doing today. [1] https://www.sec.gov/ix?doc=/Archives/edgar/data/27904/000002790419000003/dal1231201810k.htm https://www.sec.gov/ix?doc=/Archives/edgar/data/27904/000002... page 56 [a] page 54 [2] https://www.sec.gov/Archives/edgar/data/1759509/000119312519088569/d721841ds1a.htm#fin633517_4 https://www.sec.gov/Archives/edgar/data/1759509/000119312519... F-8 [b] F-4
andrewtbham 8y ago
The graphic is simple... comps are one of the most naive method of valuing a company.
- confiscate 8y ago
  agreed
confiscate 8y ago
that graphic is simple and naive Here is an 60-minute interview, in 1999. The journalist/expert made the same argument as in your graphic, that a software company is overvalued because its market cap is higher than traditional companies https://youtu.be/VuI-ss5aQU8?t=629 https://youtu.be/VuI-ss5aQU8?t=629 the interviewer literally laughed at how Amazon is overvalued, because its stock price was worth 20% MORE than a real company like Sears. Your graphic uses the same logic as that interviewer did in 1999.
- nostromo 8y ago
  Sure, maybe. But I'll note that for every Amazon there's dozens or more Pets.com. So, yes, maybe Lyft is the next trillion dollar company -- or maybe it's, you know, a cab company.
  - confiscate 8y ago
    Yes, either case is possible. Lyft could become Pets.com or Amazon. You can argue that Lyft will become Pets.com, due to other reasons, such as growth potential etc. That would make sense. BUT, the argument in your graphic, that a company is overvalued simply because its valuation is higher than traditional well-known brands, that ARGUMENT is flawed. Lyft's valuation is totally independent of Ford's valuation. These are separate companies with separate paths. Amazon's valuation was not tied to Sears--the 60-minutes journalist made the mistake of connecting the 2 together. The argument behind your graphic is wrong.
    - freyir 8y ago
      The graphic isn't making an argument, it's stating a fact. If you think Uber's valuation is sensible, I don't think this graphic could sway you.
      - confiscate 8y ago
        No the graphic was posted to make an argument. That was the purpose of why that graphic was posted: "I found this simple graphic a great distillation of why Lyft and Uber may be considered overvalued"
yojo 8y ago
It's actually worse than that for RSU holding employees. The taxation event occurs on share release for RSUs, at a cost basis of the price on release. In many cases, that will be the day of the IPO, at the IPO price. If the share price falls over the lockup period, employees end up owing tax at a share price higher than they are able to sell. Some of that is usually offset by the company withholding some of the released shares for taxes, but the current withholding rate is substantially under most engineers' marginal tax bracket. It amounts to a ~10% extra tax penalty on the share decline.
- philwelch 8y ago
  When you sell the RSU, can't you use that cost basis to claim a capital loss, reducing your taxable income enough to cancel out the tax disadvantage? The disadvantage being that you can't claim a capital loss until you do sell.
  - toast0 8y ago
    Yes, it will be a capital loss, but you can only cancel $3,000 worth of capital loss against ordinary income per year. If you had enough RSUs to make insufficient tax withholding a meaningful issue for you and the stock price is significantly down by the time your lockout expires, it might take several years to offset the losses against your income. On the other hand, having a stash of capital losses to carryover makes rebalancing easier in the future.
- toast0 8y ago
  > current withholding rate is substantially under most engineers' marginal tax bracket RSUs are withheld at Federal bonus rates, which seemed pretty reasonable (it's 25% until your total taxable comp from an employer hits $1M in the tax year, and then it jumps to 39.6%); and California equity statutory rates, which is the second to top marginal rate, which works out right, unless you made enough to pay the mental health tax. Although, given that state tax isn't deductible anymore, perhaps 25% isn't nearly enough at the federal level anymore?
  - 8y ago
mruts 8y ago
In all likelihood, many of the funds preallocated shares have already sold. People don’t subscribe to IPOs for a buy and hold strategy, they subscribe for easy risk-free profit.

alexpetralia 8y ago

> the institutions that bought the IPO are not having a windfall at present. This of course depends on when they sell, or sold!

deleted 8y ago
[deleted]

deleted 8y ago

[deleted]

ummonk 8y ago

I’d be curious how much stock the IPO institutions sold after the opened. Do they tend to hold on to most of their stock for a long time? It could be that a bunch of people who were unable to participate in the IPO but bought the stock when it became listed on the market and popped were the main losers. Also, that graphic doesn’t make Uber and Lyft seem all that overvalued - does it really seem unusual for Lyft to do as well financially as Delta?

JumpCrisscross 8y ago
> does it really seem unusual for Lyft to do as well financially as Delta? Delta's operations threw off $7 billion of cash in their FYE 2018 [1]; Lyft's burned over $280 million [2]. In the same period, Delta's net income was almost $4 billion [a] while Lyft lost over $900 million. Lyft is not doing as well financially as Delta. Instead, its investors are betting that it will--in the future--do much better than Delta is doing today. [1] https://www.sec.gov/ix?doc=/Archives/edgar/data/27904/000002790419000003/dal1231201810k.htm https://www.sec.gov/ix?doc=/Archives/edgar/data/27904/000002... page 56 [a] page 54 [2] https://www.sec.gov/Archives/edgar/data/1759509/000119312519088569/d721841ds1a.htm#fin633517_4 https://www.sec.gov/Archives/edgar/data/1759509/000119312519... F-8 [b] F-4

andrewtbham 8y ago

The graphic is simple... comps are one of the most naive method of valuing a company.

confiscate 8y ago
agreed

confiscate 8y ago

that graphic is simple and naive Here is an 60-minute interview, in 1999. The journalist/expert made the same argument as in your graphic, that a software company is overvalued because its market cap is higher than traditional companies https://youtu.be/VuI-ss5aQU8?t=629 https://youtu.be/VuI-ss5aQU8?t=629 the interviewer literally laughed at how Amazon is overvalued, because its stock price was worth 20% MORE than a real company like Sears. Your graphic uses the same logic as that interviewer did in 1999.

nostromo 8y ago
Sure, maybe. But I'll note that for every Amazon there's dozens or more Pets.com. So, yes, maybe Lyft is the next trillion dollar company -- or maybe it's, you know, a cab company.
- confiscate 8y ago
  Yes, either case is possible. Lyft could become Pets.com or Amazon. You can argue that Lyft will become Pets.com, due to other reasons, such as growth potential etc. That would make sense. BUT, the argument in your graphic, that a company is overvalued simply because its valuation is higher than traditional well-known brands, that ARGUMENT is flawed. Lyft's valuation is totally independent of Ford's valuation. These are separate companies with separate paths. Amazon's valuation was not tied to Sears--the 60-minutes journalist made the mistake of connecting the 2 together. The argument behind your graphic is wrong.
  - freyir 8y ago
    The graphic isn't making an argument, it's stating a fact. If you think Uber's valuation is sensible, I don't think this graphic could sway you.
    - confiscate 8y ago
      No the graphic was posted to make an argument. That was the purpose of why that graphic was posted: "I found this simple graphic a great distillation of why Lyft and Uber may be considered overvalued"

yojo 8y ago

It's actually worse than that for RSU holding employees. The taxation event occurs on share release for RSUs, at a cost basis of the price on release. In many cases, that will be the day of the IPO, at the IPO price. If the share price falls over the lockup period, employees end up owing tax at a share price higher than they are able to sell. Some of that is usually offset by the company withholding some of the released shares for taxes, but the current withholding rate is substantially under most engineers' marginal tax bracket. It amounts to a ~10% extra tax penalty on the share decline.

philwelch 8y ago
When you sell the RSU, can't you use that cost basis to claim a capital loss, reducing your taxable income enough to cancel out the tax disadvantage? The disadvantage being that you can't claim a capital loss until you do sell.
- toast0 8y ago
  Yes, it will be a capital loss, but you can only cancel $3,000 worth of capital loss against ordinary income per year. If you had enough RSUs to make insufficient tax withholding a meaningful issue for you and the stock price is significantly down by the time your lockout expires, it might take several years to offset the losses against your income. On the other hand, having a stash of capital losses to carryover makes rebalancing easier in the future.
toast0 8y ago
> current withholding rate is substantially under most engineers' marginal tax bracket RSUs are withheld at Federal bonus rates, which seemed pretty reasonable (it's 25% until your total taxable comp from an employer hits $1M in the tax year, and then it jumps to 39.6%); and California equity statutory rates, which is the second to top marginal rate, which works out right, unless you made enough to pay the mental health tax. Although, given that state tax isn't deductible anymore, perhaps 25% isn't nearly enough at the federal level anymore?
- 8y ago

mruts 8y ago

In all likelihood, many of the funds preallocated shares have already sold. People don’t subscribe to IPOs for a buy and hold strategy, they subscribe for easy risk-free profit.