Lyft, Uber, Pinterest & AirBnb
LUPA or PAUL is the acronym for a group of four private technology companies; that are the most anticipated private companies testing the public markets. Lyft, Uber, Pinterest and AirBnb belong to the so-called app generation; born in the 21st century with estimated valuations of more than $1 billion.
Behind these apps are billion-dollar companies that have changed the way we work, buy, move around and have fun. The rapid advancement of tech innovations no longer scare users who are used to the sheer amount of news that comes up every day.
The application revolution is a reality
This family of stocks are also referred to as “unicorns”. A term used to describe privately held startup companies valued at over $1 billion. These companies have grown exponentially over a short period of time, funded by private wealthy investors mostly from Silicon Valley. However, these companies were recently listed or are anticipated be listed in 2020.
Lyft was the first to go public on March 1st, 2019. Followed by Pinterest who started trading on the New York Stock Exchange on April 18th, 2019. Shortly after, Uber went public in May of 2019. AirBnb says it will file its IPO – Initial Public Offering in 2020.
Lyft Stocks and long-term profitability
This ride-sharing app company was founded in 2017 by the Bounder Web Inc. In fact, it was formally named Zimride from 2008 and it was only in 2012 that it began using Lyft as its official business name.
Based in San Francisco, Lyft operates in 644 cities in the United States, Puerto Rico and in nine cities in Canada. It develops, markets and operates the Lyft Mobile App, offering not only car rides but also scooters, a bicycle sharing system and food delivery services.
Previously valued at $15.1 billion, Lyft was valued $24 billion on the first day of trading, while shares began trading on the Nasdaq at $87.24, 21% above its initial IPO price of $72 per share.
Uber – explosive growth and many controversies
Founded in 2009 as UberCab by entrepreneurs Travis Kalanick and Garret Camp, the company operates globally and has also expanded into food delivery and truck and scooter rentals.
Facing public backlashes, for what some consider are unfair labour practices, the company has undergone multiple lawsuits. In addition, several cities have sharply restricted or moved to ban the service.
Although Uber may have many controversies they will still go down in history as being the highest valued private startup company in the world, recently valued at $120 billion. Unfortunately, according to the company’s most recent financials, they continue to lose money.
Pinterest – making money out of advertising
Created in 2010, Pinterest surpassed 291 million monthly active users in 2019. Over the course of 2018, the company generated $755.9 billion in revenue, a 60% increase over the previous year.
Shares of the Pinterest photo-sharing social network rose more than 25% during their first trading session on the New York Stock Exchange. After suggesting it would begin trading at $15 to $17 per share, giving it a value of $10.6 to 11.3 billion, Pinterest began trading at $19 per share, giving it a valuation of 12.7 billion.
AirBnb – peer-to-peer economy
Launched in 2008 by entrepreneurs Brian Chesky, Joe Gebbia and Nathan Blecharzyk, this short-term lodging rental platform provides access to more than five million places to stay in more than 81,000 cities in 191 countries.
In addition to working as a conduit between hosts and travelers, the company has also expanded into tourism services and has established a marketplace platform where users can trade products and services.
AirBnb has been valued at $31 billion and its revenue continues to grow. For the second quarter of 2019, the company stated it had reached over $1 billion in revenue.
Another financial bubble?
Economists have raised concerns over such high valuations and many are concerned about large losses with companies like Uber at $3.3 billion in 2019 and Lyft at $900 million.
Although these are strong brands with wide acceptance and customer popularity, profits have not been as expected.
However, according to the Wall Street Journal, a meltdown like the 2000’s Dotcom Bubble is unlikely to occur because companies now are older and bigger than the IPOs back in the 2000’s.
In addition, many of the new techs have succeeded in bulking out their revenue in new markets. In 2019, third quarter reports shows that Uber had $3.8 billion in revenue and Lyft generated $955 million in revenue.
Nothing can grow exponentially forever
According to Jeff Grabow, of Ernst & Young, LUPA-size companies will begin to shorten the time frame in which they remain private, despite the access to capital and the benefits they receive as so.
As a matter of fact investors have shown interest in other tech-based companies that lose money, such as the early stages of Amazon and Netflix . Lyft, Uber, Pinterest & AirBnB have been able to grow their businesses through ventured capital and investments, it may not be the same case with public markets.
Overall, it will be interesting to observe how these tech giants behave as publicly traded companies. Although history may not be repeating itself, a market correction for tech stocks may be on the horizon.