SAN FRANCISCO — Owning a chunk of the gig economic system grew to become a actuality for thousands and thousands on Friday when Lyft started buying and selling on the public markets, signaling the begin of a stream of inventory choices anticipated from high-profile expertise corporations this yr.
Lyft’s shares rose eight.7 % in its first day of buying and selling after opening at $87.24, far above the public providing worth of $72. By the finish of the day, the ride-hailing agency’s market worth stood at $26.four billion, making it one of the most dear American corporations to go public in the final decade. At that stage, it was greater than 23 instances the valuation of the father or mother firm of Hertz, the rental automotive supplier, and greater than the father or mother of United Airlines.
Lyft’s public market debut formalized the rise of the sharing economic system, though persistent questions stay about the impact of gig-type work on folks’s high quality of life and their wages. When ride-hailing corporations like Lyft and Uber started rising this decade, they hawked their type of work — the place drivers are freelancers who drive solely once they wish to — as offering flexibility. But with drivers ineligible to obtain worker advantages like well being care, the companies have since prompted lawsuits and labor protests.
Gig economic system corporations additionally haven’t proved a enterprise elementary: that they’ll earn a living. While Lyft and Uber have been increasing quickly, they’ve misplaced near or greater than $1 billion a year. And the companies are spending heavily on new initiatives like food delivery, electric bikes and self-driving vehicles, making profits a distant prospect.
[Unicorns are riding into the public markets, and their elite early investors will be the biggest winners.]
Even so, Lyft’s offering means that people will now own shares of the company in their mutual funds and stock portfolios, giving them more of a vested interest in the financial outcomes of gig economy firms. That will be compounded when Uber, the world’s biggest ride-hailing operator, goes public in the next few months in what is expected to be the largest initial public offering of the past five years. Uber will almost certainly become part of index funds, which underlie the retirement portfolios of millions of Americans.
“Their business model is completely reliant on an unsettled issue, which is the status of their drivers,” Veena Dubal, an employment and labor law professor at the University of California’s Hastings College of the Law, said of ride-hailing companies. “They’ve been trying to shift risk onto workers, and now they are shifting risk onto investors as well.”
Those risks sent jitters through some investors on Friday, with Lyft’s shares falling after opening up strongly. The stock dipped to roughly $80 before declining further near the end of trading to finish the day at $78.29.
But others turned a blind eye to the steep losses and heavy spending, which bodes well for the herd of other coming tech offerings. Apart from Uber, those set to join the I.P.O. bonanza are Pinterest, the digital pin board; the messaging company Slack; the delivery company Postmates; and the home-fitness company Peloton.
Interest in buying Lyft’s stock was so high that demand outstripped supply within the first two days of the company’s road show to pitch prospective investors this month. By the end, the I.P.O. was 20 times oversubscribed, Lyft told investors on Friday.
Lyft’s high listing price and performance are a “reflection of the appetite” from investors, said Tom White, a senior vice president at D. A. Davidson, a wealth and asset management firm. “Right now, I think investors generally are focused on growth.”
With its initial offering, Lyft leapt ahead of Uber to become the first publicly traded ride-hailing firm. Logan Green and John Zimmer, Lyft’s founders, celebrated the event on Friday in Los Angeles, where pink confetti rained down them as they marked the occasion. The pair had founded Zimride, a long-distance car-pooling service for college students, in 2007. Zimride evolved into Lyft, which initially used the gimmick of fuzzy bubblegum-colored mustaches to distinguish its service.
Mr. Green, 35, who grew up in Santa Monica, and has cited heavy traffic in the area as an inspiration for Lyft, and Mr. Zimmer, 34, used the I.P.O. to announce a program called Lyft City Works. The program will donate $50 million to transportation initiatives in cities where it operates.
Mr. Green said he planned to further expand Lyft into other modes of transportation, including public transit.
“We want Lyft to be the first app that you open up,” he said. “The biggest investments we’re making today are broadening the portfolio of products that you can access within Lyft.”
The offering increased Mr. Green’s and Mr. Zimmer’s wealth, while allowing them to maintain tight control over their company. The pair hold a special class of shares that give them extra voting power, a practice common among tech founders but criticized by investor advocates.
During the nearly two-week road show, Lyft pitched itself to institutional investors as a mission-driven company focused on reshaping the transportation industry. It emphasized its do-gooder stance on encouraging car-pooling and reducing the environmental impacts of individual car ownership.
Investors’ most frequent question during the road show was what the company would look like in five years, Mr. Zimmer said. “Investors realized that ride-sharing is the tip of the iceberg,” he said.
Using independent contractors to provide services has indubitably become the keystone of a generation of tech companies, from ride-hailing apps to food delivery services like DoorDash to hair and makeup services like Glamsquad. Some researchers said contingent work could account for 43 percent of the American work force by next year, though the Department of Labor has reported that the number of workers in gig roles has remained mostly flat since 2005.
“I think it’s quite clear that this is part of a larger trend in the economy,” said Sean Aggarwal, Lyft’s chairman. “That makes it an exciting story for the long-term investor. It gives them an opportunity to participate not just in this gig economy transformation but also in this larger trend of transportation as a service.”
Mr. White of D. A. Davidson said the good will toward Lyft would eventually evaporate if it ultimately couldn’t make money.
“As we get closer to 2020, there will be an expectation that we see them narrow the losses,” he said.
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