The hype which surrounds Wall Street has broken and Lyft investors are seeing through this hype after learning their lesson the hard way.
On the first day of trading, Lyft was trading at $72 per share on Friday. Soon, it almost increased by 20 percent with avid investors clamoring to invest in the company. It went as high as $88.60 However, by the end of the day, the company shed most of its gains.
On Monday, the Dow was surging up and topped 26,000, but Lyft was still dragging and could not rise up. Towards the close, the shares plunged almost 10.42 percent and were quoted at $70.11 per share.
Investors who do not know much about the market or about particular companies should be more cautious and this lesson was well-learned with Lyft.
The ride-hailing company has a huge valuation of $25 billion which is far beyond its cost structure and annual losses. In fact, the company is almost half of that of Uber, its rival in ride-sharing business.
The hype connected with tech IPO’s should make investors cautious. The investment bankers of Lyft have been adding to the hype about the company and have attracted clueless buyers.
Investors should first understand that a company that goes public should be analyzed first. As there is no historical information or comparison to make, new c companies are best avoided if no information is available.
Lyft had shed its profits on the first day and did not finish at day’s high on the first day of trading, which is not a very healthy sign for investors.
Analysts feel that Lyft has been showing losses, which have worsened in recent years. The companies operating losses in 2018 was at $977.8 million. In 2017, the losses were at 708.3 million.
Now that the company has lost investor confidence, it has to restore confidence to its investors again.