Investor disappointment at Lyft Inc’s growth outlook underscores the pressure for rival Uber Technologies Inc to show potential backers of its initial public offering that it can expand services such as food delivery even as its core ride-hailing slows down.
Lyft posted its first results as a public company, one of the last data points for investors ahead of Uber’s IPO this week. Lyft, a smaller company, said growth was slowing and losses would shrink after this year.
Uber, though, has bet on a broader range of services and markets than Lyft, comparing itself recently to Amazon.com Inc , which did not turn a profit until several years after its IPO.
“If you believe in the Amazon model, you basically believe that Wall Street will fund these companies indefinitely with almost zero cost of capital, as long as they post these extraordinary growth rates,” said Renny Ponvert, CEO of independent research firm Management CV. “If that dynamic changes… things could get rough really quickly.”
Uber Eats, he said, was an example of a market that is similar to ride-hailing and can make for a relatively fast ramp-up of services and improvement in margins, he said, describing Lyft as playing catch-up. Uber also has expanded into freight hauling, for instance.
A person familiar with Uber’s discussions with investors said the potential for Uber Eats in particular was resonating with investors. Uber’s IPO is more than three times oversubscribed, the person familiar with the matter said.
Uber is scheduled to price share in the IPO, expected to be the biggest of 2019, on Thursday, and then begin trading on the New York Stock Exchange on Friday.
Uber declined to comment.
The company currently plans to sell 180 million shares in the offering to raise up to $9 billion.
Uber is going public just over a month after Lyft, which priced very well in the IPO but has since struggled in trading.
Uber and Lyft are racking up enormous losses, both reporting first-quarter net losses of around $1 billion. – Reuters