Since going public in late March, Lyft’s stock price has plummeted.
Originally priced at $72 per share – the stock jumped as high as $88 on March 29, it’s first day of trading. Since then, however, it has fallen by over 36%, and is now hovering near $56, giving Lyft a market value of $16.4 billion.
If the stock continues to decline, several prominent early investors would be underwater on their investments. Before start-ups sell shares to the general public, they frequently sell chunks of ownership to investors such as venture capital funds, mutual funds, and wealthy individuals. Each new sale, known as a “funding round” pegs the company at certain price.
If Lyft goes under $50 per share, Fidelity Investments would be in the red, at least on a part of its Lyft investment. The asset manager led a group of companies that invested $600 million last summer in a round of funding that valued Lyft at $14.5 billion.
If Lyft stock goes under $40, Google parent Alphabet will have lost money too. Alphabet’s investment fund led a $1 billion financing round in late 2017 that valued the company at $11 billion. (Fidelity declined to comment. Alphabet didn’t immediately respond to an email seeking comment.)
Other investors who got involved earlier – like Silicon Valley-based venture capital firm Andreessen Horowitz and activist billionaire Carl Icahn – still have plenty of leeway, however.
Lyft could still turn out to be a great investment. Other initial public offerings, including Facebook, have plunged from their initial price but gone on to be home runs. Originally priced at $38 per share during its 2012 IPO, the stock took a nosedive and didn’t reach that price again until 14 months later. Now, almost seven years later, the stock price has increased nearly five-fold to almost $180 per share.
But Lyft’s hype – and subsequent travails – could mean trouble for other hotly anticipated tech IPOs, most immediately Pinterest, which could price later this week.
If Lyft goes under $50 per share (currently $56), Fidelity would be underwater on their investment.— Scheplick (@scheplick) April 17, 2019
If it goes under $40, Google (Alphabet) will be in the red.
Icahn and Andreesen Horowitz have plenty of room. A great chart from The Information. pic.twitter.com/l43FXYYMYU