Lyft’s recent announcement to introduce its IPO or initial public offering is likely to help the company gain an edge over its major competitor Uber. Lyft is estimated to go public with a valuation of USD 25 billion compared to a USD 120 billion valuation of Uber. With this development, Lyft will become the first mobility startup to go public.
MarketsandMarkets™ View Point
According to Kumar Rohit - Team Lead : Automotive & Transportation, at MarketsandMarkets™, it is not a new thing for technology startups to file for an IPO. However, this is the first case of a mobility startup going public. While Uber and Lyft have been planning this move for long, Lyft has raced past its competitor in the ride sharing industry to go public. The consistent rise in Lyft’s market share in the US has helped the ride sharing company in pitching investors for an IPO. Lyft has gained a considerable part of Uber’s market share in the past couple of years and has managed to gain 35–40% share in the US market as of early 2019. Lyft has also been expanding its presence in the US and Canadian cities.
As the equity raised can be utilized for the company’s overseas expansion, the IPO is expected to help Lyft increase its presence beyond North America.
Impact on the Ride Sharing Market
The global ride sharing market is projected to reach USD 218.04 billion by 2025 from USD 61.31 billion in 2018, at a CAGR of 19.87% from 2018 to 2025. Uber (US), Lyft (US), DiDi (China), Grab (Singapore), Gett (Israel), Ola (India), and BlaBlaCar (France) are the prominent players in the market. DiDi is estimated to hold the largest share of the ride sharing market in 2018, followed by Uber and Lyft.
Ride sharing is a fragmented industry that is dominated by a few players at a global level, whereas markets in some countries are dominated by local or regional players. For example, Ola is the largest ride sharing company in India while DiDi is the largest company in China. Both these companies dominate the ride sharing market in their native countries. Uber is competing with Ola in India but had to sell its business to DiDi in China. Leading companies such as Uber have presence in multiple countries. However, there are many small players, especially in the micro mobility or car rental market, that have limited regional presence. A successful IPO by Lyft can open gateways for these ride sharing unicorns to generate funding through equity and expand their regional presence and product offerings.
Impact on the Ride Sharing ecosystem
This development is not likely to have a major impact on the overall ride sharing ecosystem. Most of the companies including OEMs, Tier 1 players, and software and services providers are already publicly listed companies.
Lyft’s IPO would help the entire ecosystem and related stakeholders to better evaluate the market and mobility startups. Uber is valued more than USD 100 billion although the company has made losses of more than USD 2 billion. As seen with multiple tech IPOs that open with a high but are not able to continue the hype, this will be a litmus test for Lyft and similar mobility companies that are highly valued but continue to suffer losses in their operations. This will also provide an opportunity for companies with a lower valuation than the market leaders to justify their valuation to the stakeholders.
The presence of several global and local players has intensified the competition in the ride sharing market. These players have adopted various strategies to diversify their global presence and increase their market share. Major strategies include new product launches, expansions, mergers & acquisitions, and partnerships. IPOs can be a new business strategy for ride sharing companies to get the funding required to expand their business offerings and regional presence. The IPO by Lyft will make a strong case of mobility companies to go public to fund their expansions.