Lyft, in the “highest-profile stock sale of the year,” slipped below its offering price this week amid Wall Street “concerns about how fast the ride-sharing company can start making money,” said Esha Day in Bloomberg.com. Though the muchhyped company is still valued at around $20 billion, it’s a disappointing debut. Lyft is an early entrant in a long line of highly valued tech companies preparing to go public this year, said Stephanie Stamm in The Wall Street Journal. Lyft’s IPO sets the course for Uber, Pinterest, and Palantir—all “unicorns” valued at over $1 billion as startups—to follow in the coming weeks. “Despite their years in existence, most of these companies aren’t making money and are far from becoming profitable.” It’s by no means unheard-of for money-losing companies to sell shares to the public. Tech giants like “Facebook, Google, and Apple were profitable years before they went public,” but Twitter and Amazon were not. The difference is one of scale: “Lyft’s $911 million annual loss” in 2018 “is more than that of any U.S. startup that has ever gone public.” And this is just the beginning: Uber, expected to sell shares in the coming months, is burning far more cash.
There are some striking reminders of 1999—right before the dot-com bubble burst, said John Cassidy in The New Yorker. While these are larger and more seasoned companies than the web startups of 20 years ago, there is still a lot of hot air blowing—as when Lyft starts promoting itself as a “revolutionary force.” “Veterans of the 1990s boom will also recognize the facilitating role being played by fee-hungry Wall Street firms” leading the offerings, and the interest rates held down by the Federal Reserve. Most of these unicorns are still “chronic cash-eaters” that might have “gone out of business without a plentiful supply of venture capital.” All that early investment could mean these “companies’ fastest phases of growth are behind them,” said Matt Phillips and Erin Griffith in The New York Times. The number of public companies in the U.S. has declined 52 percent since 1997, and thanks to “pent-up demand,” high-profile IPOs are producing giddy responses. But the largest gains might have been captured by early investors. While in recent decades companies turned to public markets early in their life, the current wave of newly public firms have already built “huge businesses over the course of many years on the back of private money.” Mutual funds, hedge funds, and giant investment partnerships amassed big stakes in these companies long before they were ready to sell shares to the public. “Individual investors,” says one markets analyst, “are getting in too late.”