Traders can learn a lot from the initial public offerings of the two ride-sharing giants taking the transportation business by storm.
Both IPOs happened in the last three months. And while there are some similarities, there are also some key differences…
After Lyft went public in late March, the company’s stock price slumped almost 15%. It’s a great example of just how tricky an IPO can be. Lyft shows losses of over a billion dollars in the last quarter. No big surprise that isn’t helping boost investor confidence.
Uber’s IPO is newer, but recent analysis seems to indicate that Uber may be losing even more money. Like other big IPOs this month, Uber may also be racing the clock. Uber wants to make its moves before U.S.-China trade issues or Fed increases push the general markets down. Or before analysts start talking about an impending global recession.
So far, Uber hasn’t suffered deflation quite like Lyft, as its price hovers around its IPO price. Still, some analysts believe that market shorts may be circling.
Wonder how market movers may short Lyft or Uber — even with lock-in agreements in place? Check out ‘special purpose vehicles’ (the kind that don’t have wheels) where traders may find means to skirt the policies aimed at preventing rampant short behavior.
Both these companies are hailed as innovators … They offer revolutionary ridesharing that can help Americans who can’t or don’t drive navigate our car-based communities.
Uber, for its part, is drawing more enthusiasm as ‘the next big tech stock’ — but so far, it can’t reach the spikes achieved by other recent IPOs, like plant-based burger maker Beyond Meat.
It may be too soon to draw other parallels between Lyft and Uber … it’s all so new, especially for Uber. In the meantime, it makes sense to think about the most prominent threats to long-term solvency, one of which is out-of-control shorting.
The reason these companies have lock-ins is so that shorts don’t crash the stock before it has a chance to grow. Keep an eye on how both of these tickers fare in the months ahead, as general markets jitter over U.S.-China trade war fears, and those with an interest in index gains try to stall the Federal Reserve on ‘quantitative easing.’
How did you trade the Lyft and Uber IPOs? How do tech stocks and IPOs play into your overall trading strategy? Leave a comment below.
