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Tech firms lead rebound in IPOs but disappointing Lyft float raises concerns about hefty valuations

Could a rough start to trading by ride sharing company Lyft set the stage for upcoming tech IPOs?

Lyft has been trading below its IPO price

Tech firms are leading a rebound in initial public offerings but hefty valuations beg the question of whether those set to float could be lined up to fail.

In London, Network International is set to become the biggest IPO of the year as advisers to the Dubai-based payments company said their order book had been “multiple times oversubscribed”.

In the listing, which is set to take place on Wednesday, Network International will sell as much as 40% of the company at between 430p and 450p per share. That would value the business at between £2.15bn and £2.25bn.

READ: Travelex owner Finablr considers London float after strong demand for Network International IPO

Based on the top end of the price range, the IPO values the business on a multiple of nearly 10 times last year’s revenue of US$298mln.

Rival payments firm, Finablr said it is considering following suit with a London stock market flotation that could raise at least US$200mln.

READ: AIM IPOs have ground to a halt, but there’s still money out there for London’s small-caps

The United Arab Emirates-based payments company, which also owns Travelex, UAE Exchange and Xpress Money, said it could sell a mix of new and existing shares totalling at least 25% of its equity.

The two stock market debuts could lead to a revival of IPOs in London, which has dried up in recent months amid Brexit uncertainty.

US IPOs pick up after slow end to 2018

Across the pond, IPOs are also staging a come back after a slow end to last year.

Last week fixed-income and derivatives platform, Tradeweb Markets Inc (NASDAQ:TW), became the third major IPO in the US this year.

Tradeweb had a strong start to trading on Thursday, with its shares closing at US$33.81 each, above the IPO price of US$27.

Jeans maker Levi Strauss & Co. (NYSE:LEVI) also had a successful IPO with shares rising more than 30% on its return to the stock market in March.

The IPO raised US$623mln through the sale of 36.7m shares at US$17 each, above an indicated price range of US$14 to US$16 a share. Shares closed their first day at US$22.41.

Weak start to trading by Lyft 

However, ride sharing company Lyft Inc (NASDAQ:LYFT) had less success.

The stock sold at an initial IPO price of US$72 per share in an oversubscribed offering and ended the first day of trading on March 29 at US$78.29 but shares have since made a U-turn and currently sit at US$68.46.

Lyft is not the only US tech firm to have a disappointing start to trading.

Facebook Inc (NASDAQ:FB) and Alibaba Group Holdings Ltd (NYSE:BABA).

In 2017, Snap Inc (NYSE:SNAP) had ambitiously set its IPO price at US$17 a share but after an initial spike fell steadily through the end of 2018.  More than two years later, its shares are at US$12.41, still well below the IPO price.

Similarly, Alibaba Group Holding Ltd (NYSE:BABA) fell below its IPO price 233 days after its 2014 flotation while Facebook slipped under its IPO price in its second day of trading in 2012.  

However, shares in Alibaba and Facebook have since recovered.

Concerns about upcoming Pinterest and Uber IPOs 

Looking at this year’s IPOs, Pinterest and Uber are the next tech firms expected to float.  

Perhaps learning from the past mistakes of its sector peers, Pinterest revealed on Monday that it was pricing its IPO at a lower valuation than its latest round of public financing.

Hot on the heels of Lyft’s overpriced listing, Pinterest set a price range of US$15 and US$17 per share, giving it a valuation of nearly US$11.3bn.

That compared to the US$12bn valuation the online pinboard company fetched from raising US$150mln in 2017.

Uber is expected to launch its IPO later in April. It is tipped to be the largest IPO of 2019 in the US with a valuation of more than US$100mln.

However, there are concerns Uber could meet a similar fate to Lyft.

Both Uber and Lyft are both loss making despite revenue growth as they invest heavily into autonomous cars.

Last year Uber’s revenues jumped 24% to US$11.3bn as bookings grew 37% but it made an adjusted loss of US$1.8bn.

Lyft generated US$2.2bn in revenue in 2018, more than double the amount recorded in 2017, but its losses amounted to US$911mln.

Quick facts: Lyft Inc

Price: 28.81 USD

Market: NASDAQ
Market Cap: $8.84 billion


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