Arnon Dror | Lyft’s IPO Beats Uber to the Punch
Arnon Dror is in awe of companies dubbed as “unicorns” – that is, privately-held startups worth $1 billion or more. Most unicorns have been in the tech industry, with two ride-sharing platforms, Lyft and Uber, trying to out-do each other in terms of valuation, revenue, and market share. Arnon Dror has taken both Lyft and Uber rides, and while he likes Uber’s no-nonsense business model, he appreciates how Lyft has taken ride-sharing and turned it into an experience in itself, with the company giving away pink mustache grill ornaments for drivers to attach to their cars. Image Source: The Business Journals
For Arnon Dror, Lyft’s recent IPO announcement couldn’t have come at a better time – although to other market observers, announcing an IPO so soon after reporting record losses is poor timing. The company is aggressively courting both drivers and passengers by giving discounts on fares, The Information said in a report in late February. These discounts covered up to 33% of Lyft trips and have succeeded in raising the company’s market share from 30% to 34% in terms of revenue. Lyft itself estimates that it now has 39% of the market as of December. The rest of the market, though, remains solidly committed to Uber.
What does the Lyft IPO mean for drivers, commuters, and the investing public? Arnon Dror has heard that the company is planning to give cash bonuses to some of its drivers, who are then expected to purchase Lyft stock ahead of the IPO. It’s a pretty tricky – and simple – workaround to SEC rules that keep Lyft from giving shares in the company to its drivers, who are considered freelancers. While Uber has been busy fighting off corporate troubles since 2017, including the loss of the Southeast Asian market to homegrown platform Grab, Lyft has been recruiting drivers and riders who are disillusioned with Uber’s services.
In addition, Lyft has been silently expanding its portfolio, completing the purchase of Motivate in December. Motivate, which operates Citi Bike in New York, has been in the sights of Arnon Dror for the longest time due to its focus on alternative modes of transportation. Lyft is now operating under the assumption that personal car ownership will cease existing in major cities in less than a decade, and its recent purchase of Motivate and its own electric scooter division only bolster that bold claim.
Despite these wins, Lyft is still not done expanding. Arnon Dror believes that Lyft needs to expand both its coverage to outside the US and Canada if it’s going to overtake Uber in market share. In addition, Lyft does not have a thriving food delivery business like that of Uber. Going public might help Lyft raise enough of a war chest to take on Uber in that front and to expand to other geographies, including India, Europe, and Latin America.
One unlikely winner of the Lyft IPO? Japanese tech conglomerate Rakuten, which holds a 13% stake in Lyft. Arnon Dror believes that any sort of good news for Lyft will also raise Rakuten’s stock, which rose almost 6% at the start of trading on March 4.