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Lyft Stock Is Crashing So Hard Even Its Early Investors Could Lose Money

By:
Sergei Klebnikov
3 min read
Signage for Lyft is seen displayed at the NASDAQ MarketSite in Times Square in celebration of its initial public offering (IPO) on the NASDAQ Stock Market in New York, U.S., March 29, 2019. - Shannon Stapleton—Reuters
Signage for Lyft is seen displayed at the NASDAQ MarketSite in Times Square in celebration of its initial public offering (IPO) on the NASDAQ Stock Market in New York, U.S., March 29, 2019. Shannon Stapleton—Reuters

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.

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