Lyft’s stock has had a bumpy ride since it went public at the end of March.
On its first day of trading, the stock price for the rideshare company jumped 20%. Lyft had priced its shares at a range between $70 and $72, but the stock soon climbed to $87.24.
Now, however, Lyft’s stock trades at about $58 a share*, or 35% below its recent high.
So what’s going on?
IPOs can be volatile
When a company has an IPO, it’s typical for a newly issued stock to be subject to significant increases and decreases, at least in the short run. That’s known as volatility. Volatility for the stock can be especially high in the first few months following an IPO, and so can the potential for short-term losses as a result.
Why? Investors, analysts, and other stock market participants are often uncertain about the prospects of newly public company, and that can all factor into the share price. For example, investors typically want to know if a company is worth the valuation it achieved at the time of its IPO. They may also want to know if a company will be profitable in the years to come, or whether it will continue to have losses.
In Lyft’s case, it had revenue of $2.2 billion in 2018, double its sales in 2017. However, the company lost nearly $1 billion in 2018, according to its stock prospectus, an increase of 32% compared to its losses for 2017.
Do your homework
It’s important for investors to kick the tires of any company whose stock they plan to buy. Remember, as a public company Lyft is required to file paperwork with the Securities and Exchange Commission (SEC) on a regular basis, detailing its financial performance and providing other critical information about the company that investors will want to know about.
That information, which includes a company’s revenue, profits, and losses is available to the general public—meaning anyone can look at it.
You can find out more about the Lyft’s lock-up period and other information about Lyft by looking at its prospectus, a publicly available document on the Securities and Exchange Commission’s website EDGAR.
Follow the Stash Way!
Stash recommends following the Stash Way, which includes regular investing, diversification, and investing for the long term.
Investing for the long term can help insure that you aren’t locking in your losses due to short term fluctuations in the price of a stock.
And remember: All investing involves risk. It’s possible for stocks, bonds, and other securities to lose their value due to changing market conditions.