Both Uber and Lyft filed confidential paperwork with the Securities and Exchange Commission last week, setting each startup in motion for initial public offerings as early as the first quarter of 2019.
That marks the start of a new stage in the ride-hailing wars, with each company poised to raise a ton more money and the business model newly exposed to the scrutiny of public markets for the first time.
That’s theoretically interesting because both Uber and Lyft continue to burn through cash at astounding rates, even as American city-dwellers increasingly take their services for granted. Uber, for example, lost more than a billion dollars in the third quarter of 2018. At the same time, its rival has said (dubiously, in my view) that its service permitted a quarter-million users to give up their personal vehicles. This raises a big question: Is ride-hailing’s shaky business model going to be reformed to please no-nonsense investors on Wall Street?
Definitely not. Voting control probably won’t be for sale. The business model may not necessarily make sense to me or you, but it’s already passed muster in the companies’ private fundraising sessions—essentially, miniature IPOs at which a huge range of investors beyond Silicon Valley’s usual suspects have queued up to get their money into ride-hailing. Uber CEO Dara Khosrowshahi has said the company needs a few years to get into the black and doesn’t see that fact as incompatible with selling $100 billion in stock. (Amazon lost money for years after it went public, too.)
Another aspect of this that seems interesting at first glance but isn’t: the sprint to be the first to offer ride-hailing stock. It feels like each company is racing the other as well as uncertainty in the stock market. In reality, there’s plenty of room for both, even in a sinking stock market, and whatever hiccups that accompany the timing of the IPOs will disappear once each company has been traded for a while. To U.S. users, Uber and Lyft are synonyms. But the latter company is tightly focused on offering cab rides in North America, while the former has its hands in freight, autonomous vehicles, food delivery, and flying cars.
At the end of the day, Uber will be by far the biggest IPO in history. A spectacle to be sure. But ultimately, the rides will still be cheap, the business will still lose money, and you’ll forget the “race to IPO” ever happened.