Lyft results underscore importance to Uber of life beyond ride-hailing

Reuters Business 08 May 2019 11:10

NEW YORK (Reuters) - 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.

FILE PHOTO: Uber and Lyft signs are seen on a car in Redondo Beach, California, U.S., March 25, 2019. REUTERS/Lucy Nicholson /File Photo

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 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.”

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 declined to comment.

Uber is going public just over a month after Lyft, which priced very well in the IPO but has since struggled in trading.

Lyft also raised some questions about Uber’s focus on growth when Chief Financial Officer Brian Roberts said competitive pressure from promotional offers to riders “has recently receded”.

Uber, the world’s largest ride-hailing company, is aiming for a valuation of between $80.5 billion and $91.5 billion in the IPO. This is as much as one-third below what the startup’s insiders had hoped for last year, with Uber adopting a more cautious approach in the wake of Lyft’s post-IPO struggles.

Reporting by Joshua Franklin in New York; Editing by Lisa Shumaker

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