A Safer Way to Trade the Lyft IPO

10:49 03/09/2019

Over the last few weeks, Lyft filed to raise up to $100 million in a public offering, and will soon list on the NASDAQ under the ticker, “LYFT.”


But as with most IPOs, we do urge caution.


In fact, we recommend ignoring IPOs out of the gate altogether.  


There’s a simpler way to buy every hot IPO and quite honestly, do better.  


Lyft IPO: What the S-1 Says


If you take a look at Lyft’s S-1, we can see that the company’s list of users continues to turn higher.  In 2018 alone, it had 30 million total riders across the U.S. and Canada.


Active riders increased 47% year over year in the last quarter of 2018.


At the same time, revenue is increasing.


In 2018, the company earned $2.1 billion.  While that may not sound like a lot, we have to consider it’s a sizable jump from $1.1 billion sales of 2017, and $343 million sales in 2016.  More than 200% growth in two years isn’t too shabby.


Unfortunately, the company is bleeding cash.


While it managed to earn $2.16 billion in 2018, it also saw its net loss grow to $911.3 million in 2018 from $688 million in 2017.  For comparison, Uber lost $1.8 billion in 2018.  Worse, Lyft has already warned that it has “incurred net losses each year” since its inception, and “we may not be able to achieve or maintain profitability in the future.” 


That doesn’t exactly instill confidence in potential investors.


There are also potential risks to the company, which it highlights in its S-1, as well.


For example, the U.S. government could force Lyft to change the worker status of drivers from contractors to employees, for example.  Right now, drivers don’t get overtime or benefits, like health insurance, as contractors. Should that change, the company noted, it “could harm our business, financial condition and results of operations.”


There’s a smarter way to trade IPOs like this one.


The First Trust US Equity Opportunities ETF FPX 


Remember, the FPX tracks hot IPOs in their first 1,000 days of trading.  By buying it, not only can you avoid paying gobs of money for IPOs that may or may not work out, but you’re also being exposed to multiple hot IPOs at the same time at lesser cost.


Plus, as you can see, the FPX never once took a hit on any of the failed IPOs either.  Even with some of the most obnoxious IPO failures, the ETF managed to run from a 2009 low of around $11 to a recent high of $75.  It’s a safer alternative to buying an IPO.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
Most Read