At the beginning of December 2018, Uber and Lyft, the logistics companies based in San Francisco had both filed their IPO submissions to the Securities and Exchange Commission, however, many analysts are suggesting that the upcoming IPOs won’t get a burning attention that both companies are hoping for.
This is the case because both companies have been losing in revenues for the past several quarters, but still, investors are going bullish on Uber in predictions in oppose to the less known Lyft.
Uber Predicted to Score Around 120 Billion Dollars in Offer
While Lyft s planning on having their IPO issued by March 18th, 2019, and start live trading on Nasdaq already by the beginning of April, Uber representatives still remain quiet on the matter of the exact date of the issuance of Uber Initial Public Offering.
What is known by far is that both companies filed their confidential IPO filings to the Securities and Exchange Commission back at the end of 2018, having Uber representatives stating that their IPO preparations are set to last for at least several more weeks.
By the time Uber’s IPO would be ready for release, Lyft should have already started to live trade on Nasdaq exchange in accordance with the plan.
However, even though Lyft may acquire a starting advantage as far as their IPO sale concerned, analysts are predicting that the IPO won’t score more than 15 billion, in oppose to the predicted 120 billion dollars for Uber at their upcoming initial IPO sale.
In addition, Uber is available in 70 countries around the globe, while Lyft is only available in the US and Canada with no clear plans on whether the company would be gong for an expansion in the upcoming period.
Uber also has a larger market capitalization in oppose to its competitors, such as Lyft, which means that Uber’s IPO may go bullish despite the fact that Uber has been losing money in the last fiscal year.
Wait and see before you invest!
Your best opportunity to invest may be later. According to CNBC, while these companies have found their window to go public, your best opportunity to invest may be later. New offerings come with high risks and few guarantees. The longer you wait, the more likely you are to get a fair price, experts say.
For multiple companies, it’s the moment they’ve been waiting for: The window has opened for them to go public. You’ve probably heard the names, including Levi Strauss, which made its public market debut this week. Ride-sharing businesses Lyft and Uber, among other companies, are also teed up to go public in the coming months.
But if you’re thinking you want to invest in these stocks, experts generally have one word of advice: Wait. “IPOs aren’t just about, ‘Oh, I want to invest in the things I know,’” said Kathleen Smith, principal and manager of IPO ETFs at Renaissance Capital. “It’s about, ’How do I make money investing in these?″ “It doesn’t do any good to own something when you’re losing money in it.”
In today’s market, chances are that buying in on a newly public stock could be a losing proposition. Financial experts say there are several reasons why. You could already be at a disadvantage. Even though the stock is not yet public, you could already be behind. Just accessing IPO shares is difficult, Smith noted, because most shares will be allocated to big institutional clients of Wall Street firms.
They have already reached the peak
What’s more, many of the names going public now have waited longer to go public and seen their valuations surge during that time, said Nicole Tanenbaum, chief investment strategist at Chequers Financial Management. Uber and Lyft, for example, are considered unicorns, or startup companies valued at more than $1 billion. Along the way, they have raised large amounts of private funding. Uber previously raised roughly $20 billion in funding and is eyeing a $120 billion valuation when it goes public. Lyft has raised more than $5 billion and plans to be valued at $23 billion.
“When they do go public, much of the appreciation has already happened in the private markets,” Tanenbaum said. That means that earlier investors, who got in at a lower price, stand to see greater gains. “The upside for the public investor is much more diminished,” Tanenbaum said. Some companies that are going public these days — including Levi Strauss and Lyft — are pursuing a dual-class structure. That means that certain investors — notably company management — have preferential shares and voting rights compared to a separate common stock that typically comes with just one vote per share.
“In the long run, it’s not good,” Smith said. “If problems happen with the company, you want to be able to know the founders can’t just do what they want without some kind of checks and balances.”
Think of Facebook: Investors suffered losses
You might not be able to stomach the ups and downs. While many IPOs close up on their first day, that first day pop and subsequent run up is not guaranteed, according to Michael McKevitt, director of financial planning at Guillaume & Freckman. Think back to Facebook’s IPO in May 2012. The company went to market at a high price and investors suffered losses at the outset.
Be ready for multiple 50 percent declines
It took about a year for Facebook’s stock to get back to its opening price. Today, the stock’s performance would be considered a success — as long as you held on. “Even if you pick the right company, like Facebook, which has done amazingly well, you still had to put up with a 50 percent decline, multiple 40 percent declines, multiple 20 percent declines,” McKevitt said. “How many people bought it and held onto it through all of these moves?”
Investors would be wise to keep in mind that the lock up period could affect the stock price, said Megan Gorman, managing partner at Chequers Financial Management. Lock up periods are a set amount of time, typically three to six months, when large shareholders are prohibited from selling their shares following an IPO. Once that time is over, that can sway the stock price. “You can sometimes see the stock price has a pull back — not always, but there can be — when the lockup ends,” Gorman said.
Is it ok to invest in a newly public company?
You could be investing the wrong way. All of those considerations mean one thing: Investing in a newly public company might not be the right decision for you — at least for now. “If you want to be the guy or gal at the cocktail party or the golf course saying that you bought one of those unicorns when they IPO’ed, as long as you go in with the expectation that it might not be the best investment you ever make … that’s great,” Gorman said. “But if this is your retirement money, if this is all of your savings, going in an IPO doesn’t make sense from a big picture perspective.”