Lyft shares drop below opening price on second day of trading
Shares in ride-hailing app Lyft dropped below their opening price today in the first sign of jitters over the company’s hefty $24bn (£18bn) valuation.
The tech firm’s share price dropped as much as 11 per cent to $69.40 – below the initial public offering (IPO) price of $72 – before clawing back some ground.
Read more: Lyft IPO paves way for flurry of tech floats in 2019
Lyft's shares had enjoyed an 8.7 per cent rise on their first day of trading on the Nasdaq on Friday. The firm closed at more than $78, making it the biggest US tech IPO since Snap in 2017.
But the gains fell away abruptly this morning, sparking concerns the San Francisco-based firm may have been overambitious in its pricing.
Michael Hewson, chief market analyst at CMC Markets, told City PM the share price drop “reinforced” his belief that the stock is overvalued.
Lyft last year posted a loss of more than $900m and may not turn a profit for several years, a fact Hewson said could lead to it “burning through cash like nobody’s business”.
But he said he would not be concerned unless the firm’s share price fell below $62, which was the lower end of its initial target range.
Read more: Lyft prices shares at $72 ahead of New York IPO
The poor day of trading may set alarm bells ringing for Lyft’s larger rival Uber, which is planning to float later this year.
Banks have reportedly estimated the IPO could give Uber a $120bn valuation, but the performance of Lyft’s shares will be a vital litmus test for the firm before its own float.