Description: In a race to see which ride service will go public first, it looks like Lyft is going to race rival Uber. In its move towards an initial public offering (IPO) on the stock market, Lyft has released financial information for the first time. And the results are interesting. While the company is rapidly growing, doubling its revenue in 2018, it faces the same problem of several other prominent “gig economy” representatives: it doesn’t make money. Lyft has lost somewhere around $3 billion since 2012. As another example, Dropbox went public last year, with kind of a scary warning that it might never make money.
Date: March 1, 2019
1) Why would investors be so interested in a company that has lost so much money?
2) Have you ever checked out a tech darling to see if it – like Dropbox and Lyft – may have never made money (or perhaps is only marginally profitable)? Organize a class exercise to see if you can build a bit of a list of unprofitable companies in the gig economy.
3) See case CT3-2 on page 157 of Wiley’s Financial Accounting: Tools for Business Decision-Making. There you can see a short case about Lyft’s rival Uber. Consider taking on this case as a class activity.
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