Lyft’s IPO gives regular folks the chance to make or lose a fortune.
When shares of LYFT begin trading on the floor of the Nasdaq on Friday, it will symbolically usher in the end of an era that has kept ordinary people from capitalizing on Silicon Valley success (or cursing its failure).
Lyft is the first mega-IPO of 2019, a year that is expected to be the biggest blockbuster for US tech IPOs since the dot-com boom. Following Lyft later this year will be at least three other tech companies expected to be valued at over $10 billion, including Slack, Pinterest, and, of course, Uber — the biggest IPO since Alibaba in 2014.
A lot of startup executives and on-paper rich investors will now be real-life rich. But this year will be the first in a long time that ordinary people can call up a broker, place a trade, and have the same access to some of the moneymaking, billion dollar companies that Silicon Valley insiders and venture capital firms have had for the last decade on private markets. That’s why Friday’s opening trades are significant: They mark a moment in the broadening of the modern relationship between Silicon Valley and the American economy.
Startups staying private for longer has meant that the appreciation in value of companies like Lyft haven’t been shared across the world.
It wasn’t always this way: Amazon went three years before its IPO. Google waited six. Even Facebook only dragged it out for eight.
The trend line has continued apace: Uber will last 10 years as a private company. Same with Slack. Same with Pinterest. Lyft will beat them all, going 12 years from its predecessor company’s founding.
Startups like Snap’s six-year-long run from launch to IPO are the exception. A vast amount of the value creation in Silicon Valley comes from just a few companies, and this current crop of post-recession unicorn companies has told the public markets “not now” for too long.
Yes, one of Lyft’s largest shareholders is the mutual fund giant Fidelity, giving 401k account holders the chance to have a small piece of the company in their retirement accounts. And yes, there are arcane ways for wealthy individuals to buy shares on secondary markets.
But if the average person wanted to buy shares of a company like Lyft in, say, 2014 (at $10.13, as investors valued it), they couldn’t. Some well-connected rich guy in Palo Alto, though, could. And that rich guy could now make seven times his money if he, for instance, sold his shares ahead of this Friday.
That’s why this IPO season matters for the middle class. The Silicon Valley bull market has been off limits to them. Companies on the S&P index have rocketed 50 percent over the last five years. But that pales to Lyft’s 700 percent appreciation over the same time period.
These high-growth startups don’t tend to repeat that meteoric ascent once they’re public. It’s not that buying shares of Lyft will turn the middle class into the mega wealthy. But now they’ll have the access to that opportunity.
Lyft is expected to raise over $2 billion when its stock is sold for somewhere north of $70 a share late Thursday to insiders, who will ride whatever “pop” its bankers manufacture. Only Wall Street types with relationships with the investment banks will be able to make that purchase Thursday afternoon, before the stock likely rises immediately on Friday morning.
That’s a reminder that there’s more to be done to democratize that process — IPO access, where you can make a quick buck, is still not available to mom-and-pop investors.
And to be sure, these retail investors very well could lose money if the stock tanks.
But it’s their right to lose money. That’s how this is supposed to work. And that begins Friday.
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