Lyft – Gift horse

Lyft should accept the gift Uber is offering.

• Lyft has filed confidential documents with the SEC signaling its intent to go public in 2019 but given the state of its battle with Uber, I think it should delay going public for as long as it can.
• The public markets are not for the faint of heart and certainly not for companies that are not properly established in their markets.
• This is because shortcomings are brutally and publicly punished which can have a substantial impact on the company’s ability to do business going forward.
• Companies with high earnings multiples (as ride-hailing companies are sure to have) have very little margin for error and a bad earnings report followed by a substantial decline in the share price can lead to a loss of public confidence in the company.
• This can lead to consumers deserting the product or service and/or suppliers demanding money upfront or harsher delivery terms.
• This is why earlier stage companies, which are by their nature less predictable and more volatile, are better off managing their development behind closed doors rather than in the harsh glare of the public market spotlight.
• This is true for both Uber and Lyft who are currently slugging it out for the US market and are losing a lot of money in the process.
• This brutal competition involves subsidising both rides and drivers in order to bring as much volume as possible onto the platform.
• In these network businesses, dominance is key and so this fight is likely to continue until one of them cracks.
• Given that both have very deep-pocketed backers, this could take some time and against this backdrop, being public could cause huge problems.
• Uber has also signaled its intention to go public by Q3 2019, but in this case, it has no choice.
• This is because it has committed to SoftBank, one of its biggest investors, that it will do so.
• This gives Lyft an opportunity to operate in a freer environment once Uber has gone public as it will not be shackled to quarterly reporting and the agony of trying to match expectations and make money every quarter.
• I think that this represents another gift from Uber to Lyft very like the one granted in 2017 through Uber’s series of management failures.
• Furthermore, I don’t think that going public will do anything for Lyft as I suspect that Google will continue to finance the company for as long as it takes.
• This is because Lyft now represents Waymo’s best route to market which is badly needed because Google does not make cars and the vehicle makers are increasingly reluctant to give Google access to their vehicles.
• Therefore, I think that Lyft does not need to go public to raise money nor do I think that it needs a currency with which to make acquisitions.
• Hence, I see no rational reason for it to do so other than impatient investors.
• Consequently, if Lyft is going public for this reason, I believe that its investors will regret forcing Lyft down this path.
• Lyft should look at the example of Razer, Spotify, Sonos among others for all the reasons why it should stay private until its future viz a vis Uber and the US market is decided.
• Lyft’s owners should gracefully and quietly accept the gift being proffered before it is too late.