Ride-sharing company Lyft (LYFT) is garnering all of the market's attention to close out March as it beats its rival Uber Technologies in going public.
Ahead of Friday's trading debut on the Nasdaq Stock Market, 32.5 million shares of Lyft were priced at $72 each, raising more than $2.3 billion for the San Francisco-based company and valuing it at about $24.3 billion, above many initial estimates.
The offering was initially priced at between $62 and $68 per share, but was increased due to greater-than-expected demand for the unicorn IPO. The bump in price makes Lyft the largest IPO on the Nasdaq since Alibaba (BABA) , coming up just short of Alibaba's $25 billion record.
Action Alerts PLUS portfolio manager Jim Cramer noted the pent up demand for the listing on Wednesday.
"It's compelling, it fits the mold, it's going to be massively oversubscribed," he commented.
He added that the action in recent days, marked by pullbacks in the Nasdaq, suggests that many institutional players have been pulling bets off of tech in order to take a meaningful position in the newly listed name.
Get to Know Your Driver
Lyft has encouraged investors, including the hedge funds and institutions that Cramer called out, in recent years. The company has rapidly expanded its market share versus rival Uber and a smattering of upstart ride-sharing operations. In 2018, Lyft chauffeured 30.7 million riders with its 1.9 million drivers across 300-plus markets in North America.
Many investors have actually come to prefer Lyft over Uber based on its growth story and still relatively more attractive valuation compared to Uber's rumored $120 billion offering upcoming from the Goldman Sachs (GS) -backed company.
"[Lyft] will get the benefit of the doubt because the market is still undefined and there is no real precedent for ride hailing companies," Santosh Rao, head of Research at Manhattan Venture Partners told Real Money. "Plus they have a better path to profitability [than Uber]."
He added that Uber's reportedly rich valuation will also help push investors toward Lyft.
"I would say the upside at this point, Lyft has more upside than Uber does," Rao concluded.
Path to Profitability?
To be sure, the San Francisco-centered company is still far from profitable.
According to SEC filings, the company has lost a total of $3 billion since it began operating in 2012, marking over $2 billion in losses in 2018 alone. There is still no guarantee the company will become profitable either, a risk Lyft flagged in its own filings.
The double-edged nature of the still uncertain business makes it an enticing, but dangerous play in early days.
"If you are an aggressive trader looking to trade an IPO it is really just a gamble to buy the open," Real Money contributor James "Rev Shark" Deporre cautioned. "Typically, it is better to wait an hour or so after the initial trading for a range to form. That will provide some parameters for buy and sell stops, but stocks move very fast on the first day of trading and it is extremely easy to be whipsawed."
He advised that investors looking to get in on Lyft for the long term should be conservative in their buying, leaving room to lower their cost basis as the IPO euphoria fades.
For more on his tips on IPO investing ahead of the most anticipated listing in years and the many more unicorns still to come, click here.
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