RIDEGURU
Great article. I took two big concerns raised for Lyft IPO.
However, transportation as a service is a nascent industry. Tom White, senior research analyst at DA Davidson, says: "There isn't a ton of evidence yet that it's happening on any broad scale." There is some data showing a shift, he said. For example, the proportion of 18 year-old Americans licensed to drive, fell from 76% in 1986 to 62% in 2016, according to Department of Transportation. But broad vehicle ownership data "indicates that it's not really having much of a massive impact yet".
Then there are Lyft's losses.
Between 2016 and 2018, its revenues grew strongly from $343m to $2.1bn. However, its losses jumped from $682m to $911m. Uber is also loss-making, though the figure has dropped from $2.2bn in 2017 to $1.8bn last year. Prof Strebulaev said that typically venture capital-backed businesses make losses "because they basically sacrifice profits to achieve very high growth or scale". But "the question really for everybody and for investors," he said, "is whether Lyft and Uber's business model will allow them to convert these very substantial losses into profits at some point... and whether the market will sustain those losses."
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