The ride-hailing IPO race is on. Lyft Inc. publicly filed confidentially on Thursday. That is to say, Lyft blasted out a press release telling the world that it sent the U.S. Securities and Exchange Commission its financial documents without sharing the information publicly. Announcing that secret step to the world is not unheard of but not typical, either.
It’s fitting that Lyft is trying to create as much fanfare as it can, because part of the company’s goal with this initial public offering is to draw attention away from Uber Technologies Inc. Anytime someone mentions Uber’s IPO, Lyft wants to be in the next breath (or ideally the breath before). It seems that market conditions be damned, Lyft is ready for its year in the spotlight.
The IPO stories for both companies are starting to emerge. For Lyft, it’s one about focus. The service has gained substantial ground on Uber since early 2017. Unlike Uber, Lyft’s ride-hailing business exclusively operates in North America. Lyft hasn’t fiddled with food delivery or flying cars or trucking.
Uber’s story will sound a bit like, look at this shiny object; now look at this one! While growth of its main business is slowing, Uber is eager to talk about logistics, worldwide food delivery and its chirring machine of ambitious transportation projects. This week, Uber Chief Executive Officer Dara Khosrowshahi unveiled a minibus in Egypt.
It’s focus versus frenzy.
Of course, that’s a bit simplistic. Both companies are making aggressive moves into bicycles and scooters. Last week, Lyft closed its acquisition of Motivate, the company that runs Citi Bike in New York. Lyft is running its own electric scooter program as well. Meanwhile, Uber, which owns Jump Bikes, has had acquisition talks with both Lime and Bird. Rumors abound. TechCrunch declared “Uber is going with Bird (looks like)” – but Bird has strenuously denied that an acquisition is imminent. The companies and their investors are fretting over scooters right now as winter weather is poised to slow growth.
The biggest distraction in the IPO conversation next year will likely be self-driving cars. While Uber was first out of the gate among the two companies to develop an autonomous vehicle program, Lyft has started to invest aggressively itself. The second-place U.S. ride-hailing company has tried to strike a balance between partnership and in-house development, but expenses associated with its research center will put a dent in its earnings (or lack thereof).
However, the bigger concern with investors’ autonomous obsession is less about spending—it’s about valuation. Investors risk overlooking expenditures on self-driving car R&D, hoping that Uber and Lyft can simply sell off those programs as a worst-case scenario. Shareholders should question how much of a bump those efforts give to Uber’s and Lyft’s market caps on the promise that someday self-driving cars will be good for their bottom lines.
It’d be like betting Facebook Inc. would have made the pivot to mobile, if building a smartphone application involved sending unmanned robots into busy traffic and praying for the best. Alphabet’s Waymo has scaled down its self-driving tests. Uber is, according to the New York Times, literally slowing down its cars. Signs suggest that self-driving cars are far away. Will investors pump the brakes and focus on cash flowing from the current businesses? Or will their gaze be affixed to the future? We’ll find out sometime next year.
©2018 Bloomberg L.P.