Lyft's IPO Hype Is Short-Lived

Just three days after its successful IPO, ride-hailing company Lyft has been brought back to reality as its share price dropped by nearly 12 percent on Monday. Lyft’s shares closed at $69.01, roughly 4 percent below the $72 price tag of the initial public offering. Despite Friday’s euphoria, questions about the long-term sustainability of the ride-hailing business model have always lingered and it seems like investors haven’t quite made up their mind with respect to Lyft’s future prospects.

As our chart illustrates, many tech and internet companies that went public this decade fell below their IPO price sooner or later, the question being whether or not they were able to come back up. While companies such as Facebook, Square and the Match Group did so in impressive fashion and are currently trading at multiple times their former IPO prices, many others have yet to recover and maybe never will.

Some people are already predicting a similar fate for Lyft, which has yet to prove it is really worth its current market capitalization of nearly $24 billion. Still far from profitable, it remains to be seen whether ride-hailing companies such as Lyft and its largest competitor Uber can figure out a way to turn their dominant market position into actual profits.