Lyft Makes Moves Towards IPO: Is It a Good Buy?

Lyft is reportedly taking the first steps towards an IPO, but many investors are wondering whether or not it will be worth it.

The Uber competitor used to be the underdog, but it’s quickly racing towards greater acceptance after wave after wave of Uber-related controversy has hit. Nevertheless, as a company that’s still in a disruptive industry, what could the future hold?

If you’re interested in investing in ridesharing, then your choices are Lyft and Uber. Both of these companies are going to be available for investment, and though they seem similar, their cores are very different. A few years ago, Uber had a much larger market share than Lyft, and was aggressively expanding into new territory all the time. However, Lyft managed to gain ground after a series of controversies injured Uber as a company.

Lyft has a reputation for being far more employee-friendly, while Uber has diversified more than Lyft. Uber currently has a multitude of services including Uber Eats, a service which delivers food. Lyft has concentrated primarily on its driving service, but is often considered to be the friendlier, more engaging company. All of that aside, Uber is still the larger of the two. However, this could make Lyft the less risky investment.

Uber’s primary downfall has been the way that the company has been run rather than the strength of its financial statements. Uber has been accused of internal harassment, price fixing, and trying to profit off political discontent — all of these things have driven its audience to turn against its company at times. Whether these issues are going to continue is another matter.

As a disruptive technology, it remains in question whether Uber and Lyft will even continue to be used. Presently, Uber and Lyft are in a state of quasi-legality as each individual state has determined whether they want to impose restrictions on the company, which is essentially an unlicensed taxi service. Areas like New York in particularly have struggled to figure out what they want to do with Uber and Lyft, and the ride share services are not treated the same in every state.

If there are further laws and regulations passed regarding ridesharing services, then both Uber and Lyft could find it unfeasibly expensive to continue operations. Rideshare services have a few problems: they may be considered to be unsafe (even though drivers do have background checks), and they aren’t very green (and many states are attempting to go green). A rideshare service may sound green, but in reality a driver often has to make twice as many stops to go back and forth — and because the rideshare service isn’t paying for gas, it has no impetus to conserve it.

On the other hand, the future of rideshare services are very likely in self-driving cars. Once rideshare services are able to use a fleet of self-driving cars (if they are ever allowed to do so), they will be able to vastly reduce their overall expenses because they will no longer have to pay drivers. On the other hand, this will make them a true taxi service technology rather than a “gig economy,” which will also alter the way that they make money.

Lyft has been growing as a company and does have strong fundamentals, especially when its reputation is considered in terms of Uber. Lyft is known to have more stringent background checks, generally newer cars, and a healthier company culture. Most of the concerns about the Lyft IPO reside in the future of ridesharing itself, a disruptive technology that’s likely to undergo some substantial changes in the coming years.

Investors who trust Lyft to be able to successfully pivot regarding new government regulations or changing market temperatures may want to get in on the Lyft IPO, though the truth is that while Uber may have more controversy on its side, it’s also the more diversified company. Being more diversified could either make Uber more likely to succeed or (equally likely) it could make it more difficult for the larger company to pivot. 2019 will see how the IPOs perform.

Regards,

Ethan Warrick
Editor
Wealth Authority

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