Lyft Inc's shares rose as much as 23 percent in their market debut on Friday, amid strong investor demand for the ride-hailing service that bodes well for larger rival Uber Technologies Inc . Lyft's IPO, which is the year's biggest thus far, sets the stage for other Silicon Valley unicorns seeking to debut in the stock market this year, including Pinterest Inc, Postmates Inc and Slack Technologies Inc.
The success of the IPO came despite Lyft's steep loses, criticism of its dual-class share structure, and some concerns over its strategy for autonomous driving and new laws aimed at increasing driver pay. Public market investors, keen on Lyft's revenue growth and after enduring a long stretch with few IPOs from highly valued tech companies, piled into the offering.
"There's money that wants to be invested into tech. This is a new area and people are definitely interested in exploring it," said Catherine McCarthy, an Allianz research analyst. On Thursday, Lyft priced 32.5 million shares, slightly more than it was offering originally, at $72, the top of its already elevated $70-$72 per share target range, raising $2.34 billion in its initial public offering.
The stock opened at $87.24 but later pared gains to close up 8.7 percent at $78.29, giving Lyft a market capitalization of around $22.2 billion. Lyft's offering ended up 20 times oversubscribed, similar to other high-profile IPOs, with more than 500 orders from institutional investors such as mutual funds, according to people familiar with the matter.
Despite the optimism, there are also mounting concerns that these tech IPOs may be coming at the peak of the market, when the benchmark S&P 500 Index has risen more than 200 percent since 2008. Lyft's 2018 loss widened to $911 million from $688 million in 2017, despite revenue doubling in 2018 to $2.16 billion.