Lyft was not the first ride-hailing company. But it is poised to become the first publicly traded one, and investors’ appetite for its shares proved enormous.
The company priced its shares at $72 each on Thursday, after raising its price range amid significant demand from prospective shareholders. That puts Lyft’s value at more than $24 billion as it prepares to begin trading on the Nasdaq stock market on Friday, under the ticker symbol LYFT.
In total, the company raised about $2.3 billion, having also increased the number of shares that were sold. (That amount could grow if Lyft’s underwriters sell an additional block of shares to meet even stronger-than-expected investor demand.)
The offering marks the arrival of a new generation of Silicon Valley darlings on the public markets. Many of the companies promised new business models, upended established industries such as transportation and triggered a chain effect on how people work and make a living. The public offerings cement the place of the companies in people’s lives, promise millions of dollars in investment gains for their longtime backers and are set to unleash a new wave of wealth in the tech industry.
[Elite early investors will be the biggest winners of the new I.P.O. wave.]
Among those set to follow in Lyft’s footsteps is its archrival, Uber, whose initial public offering in the next few months is expected to be the biggest in years. Others on the docket include the digital pin board company Pinterest, the messaging platform Slack and the delivery service Postmates, all betting that they will also gain enthusiastic backing from investors.
“The strong demand for Lyft certainly bodes well for other unicorns,” said Jay Ritter, a professor at the University of Florida’s Warrington College of Business, using a term for start-ups valued at $1 billion or more.
But some investors worry that these companies, awash in red ink and unlikely to turn a profit for years, are being valued too highly and could ultimately disappoint their new public-market backers. Some companies that went public while running big losses, including Groupon and Snap, now trade well below their I.P.O. prices.
In its offering prospectus, Lyft revealed that it lost close to $1 billion in 2018. Lyft and Uber regularly lose money in their competition to win new markets, where they spend amply on subsidies for riders and drivers. The companies also burn cash on other transportation initiatives, like bikes, scooters and autonomous vehicles. Last year, Lyft bought the largest bike-sharing company in the United States for around $250 million.
“With Lyft, obviously, the market is saying, ‘We’re willing to give you the benefit of the doubt on a lot of things,’ given that there are huge uncertainties about its future,” Mr. Ritter said.
At its I.P.O. price, Lyft’s market value puts it within range of old-line auto companies like Ford Motor. It is a significant increase from the $15.1 billion that Lyft earned in its last private fund-raising round last year.
Over the past week and a half, Lyft executives and their bankers embarked on a roadshow that took them from New York to Kansas City to San Francisco, pitching their business to institutional investors. Lyft initially set a price range of $62 to $68 for its shares, before raising that range on Wednesday to $70 to $72. The offering was led by JPMorgan Chase and Credit Suisse.
Between 2001 and 2018, I.P.O.s that were priced above their initial range averaged a return of 37 percent, Mr. Ritter said.
But Lyft must now prove that it is worth the eye-popping valuation bestowed upon it by its new public-market investors. That challenge includes maintaining its enviable growth rate — it more than doubled its revenue in 2018 — while showing that its focus on transportation, rather than branching out into ever-more business lines as Uber has, can be lucrative.
The offering’s success will bring windfalls for Lyft’s biggest existing investors. Among them: the company’s founders, Logan Green and John Zimmer, who are poised to be worth hundreds of millions of dollars; Rakuten, the Japanese e-commerce giant; and venture capital firms like Andreessen Horowitz.
Though Mr. Green and Mr. Zimmer are taking their company public, they will still retain control, following in a long tradition of founder-led technology businesses. The two own special holdings that give them nearly 49 percent of voting shares, despite owning less than 5 percent of the overall stock.
Lyft also plans to give cash bonuses to drivers who have completed a large number of rides for the company, so that they can buy shares at the I.P.O. price. Drivers with 10,000 rides will receive $1,000, which at the $72 price would allow them to buy 13 shares before taxes. Drivers who have finished 20,000 rides will receive $10,000.
Only full-time drivers who have been with the platform for several years are likely to make the cut, said Harry Campbell, an Uber and Lyft driver who runs the driver blog and resource site The Rideshare Guy.
“It was the right thing to do,” he said of Lyft’s cash bonuses for drivers. “If you gave 10,000 rides for Lyft, you actually were a big part of helping build this company.” He added that the I.P.O. was “kind of exciting to be part of” for drivers.
Unlike Lyft’s employees and early investors, who are restricted by a lockup period from selling their shares, drivers will be able to sell any Lyft stock purchased through the cash bonus program as soon as the company begins trading on the public market, according to an email sent to qualifying drivers and reviewed by The New York Times.
But the cash bonuses ultimately did not satisfy many drivers, who work as freelancers for Lyft and Uber and do not receive full-time employee benefits. This week, hundreds of them protested in San Francisco and Los Angeles against lower pay rates.
“If political will starts to shift against Uber and Lyft, that’s a scary proposition,” Mr. Campbell said.
