Update 03/01/2018: Lyft S-1 filing is now available.
Both Uber Technologies and Lyft Inc. filed confidentially for IPOs last Thursday, December 6th. The filings kick off a race to the public markets by two long-time rivals. The long-awaited Uber and Lyft IPOs will be warmly welcomed by investors and the financial news media as tech IPOs have been scarce over the past few years.
This rush toward IPOs for both companies could be spurred by anticipation of a coming recession by 2020.
Access to an allocation of shares for both IPOs will be very difficult for individual investors.
We’ve had our eyes on the Uber IPO for some time now due to its disruptive business model and fantastic growth. Recent headlines have indicated that the new Uber CEO, Dara Khosrowshahi, had the company on track to IPO in 2019.
The Uber stock IPO is now expected to be completed as early as the first quarter of 2019. Top investment banks have predicted the IPO may be valued at $120 billion, despite Uber’s epic quarterly losses.
Morgan Stanley will be the lead underwriter for the Uber IPO with Goldman Sachs playing a role as well, according to Bloomberg.
Lyft has selected JPMorgan, Credit Suisse, and Jefferies as lead underwriters. The latest private valuation of the company was $15.1 billion. Further reporting by Bloomberg suggests that bankers are seeking a valuation in the range of $18-$30 billion.
Though smaller, the Lyft IPO will still garner the attention of Wall Street.
Which IPO comes first isn’t important. But if both deals go well, it may kick-start a fresh push for young companies to go public sooner.
Where are the S-1 Filings?
Uber and Lyft both filed their IPOs with the Securities and Exchange Commission (SEC) confidentially. Companies do this to receive feedback from the SEC before filing a full S-1 and to keep financial information private for as long as possible.
SEC rules allow for any company to file confidentially, no matter how large. This allows companies to avoid disclosing detailed financial information if they decide to withdraw their IPO.
Companies are required to file an S-1 at least 15 days prior to their IPO roadshow.
Now we wait until the S-1 filing is released to the public. When it does, you can find it on the S-1 filing feed.
Until then, the companies and their underwriters will be diligently assembling the S-1 filings and preparing themselves for public trading.
Once the filings are released, we’ll get a better sense of the valuation ranges. We’ll likely see an initial filing with several subsequent amended filings, each revealing more details.
One possibility to look for in the filing is a directed share program. Considering the close relationship that Uber has with its drivers, there may be a small chance the company could offer drivers the opportunity to participate in the IPO. But don’t hold your breath.
How to Invest in the Uber and Lyft IPOs
For a complete guide on how to invest in IPOs for individual investors, click here. That guide will step you through the process of investing in an IPO and give suggestions on how to get access to these and other deals.
The demand for both the Uber and Lyft IPOs will be very high. High demand will make getting access very difficult.
If you’re a high net worth individual, your best chance is through your primary broker. If your account balance is high enough, you may have a shot at getting 100 shares or more.
Fidelity, Schwab, and TD Ameritrade are the best online brokers for IPO investing if your account balance is $250,000 or higher.
Motif has partnered with several underwriters to give its customers access to more than 180 IPOs and secondary offerings over the past few years. None, however, as big as the Uber IPO is expected to be.
JP Morgan, Goldman Sachs, and Credit Suisse have all allocated shares to Motif in the past.
I believe the chances of Motif offering Uber IPO shares to its customers is low but not zero. The underwriters will find plenty of demand from its wealthy customer bases. Morgan Stanley has never partnered with Motif and has historically saved its hot IPO shares for its brokerage customers.
However, we’d love to see a small amount allocated to Motif, possibly via Goldman Sachs. If Motif sends an email about the Uber IPO, reserve shares immediately. You’ll have only minutes to respond.
Request large, but don’t expect a large allocation if any at all.
With the expected Uber valuation, there may be a lot of shares to go around. That could work in our favor.
Lyft is perhaps a more likely candidate on Motif since JP Morgan is an investor in Motif and has allocated shares on several deals. Motif entered the IPO space with a JP Morgan partnership.
But Lyft will be a smaller deal and fewer shares will be available for investors which could drive up demand. It’s also the faster-growing company of the two which could make it more attractive to institutions.
ClickIPO is still building its partnerships and is less likely to receive an allocation for either deal. But for individual investors, it’s one of our only options. To participate in any deal, you need to have an account with TradeStation. ClickIPO is expected to add more online brokerage partners in the coming months.
Download the ClickIPO app here. It’s a great IPO resource even if you don’t link a brokerage account.
Learn more about how ClickIPO works here.
Read the complete list of the best online brokers for online investing.
The hype and demand may be so high for both the Uber and Lyft IPOs that pricing could get out of hand. That’s due to the general lack of tech IPOs over the past few years and the excitement and name recognition of these two companies. Investors who receive an allocation may have the option to flip shares for a quick profit.
I don’t usually recommend flipping because I believe in long-term investing. However, I’ve learned my lesson the hard way that an overpriced IPO will eventually fall.
Beware, once these companies are public and the excitement subsides, the books will be heavily scrutinized. Loses will only be tolerated for so long.
Once the IPO is complete, you’ll have the opportunity to buy shares on the open market like anyone else. There may be an opportunity after the IPO to get shares below the IPO price. We’ve seen this with many IPOs over the years, most notably Facebook, which went on to make lots of money for investors after a 50% decline from the IPO price.
I recommend the no-fee broker M1 Finance for general investing. It automates your investing and trades are free.
Traders will control prices in the days and weeks after the Uber and Lyft IPOs. If you’re not a trader, don’t try to be one.
Consider your short and long-term strategy. Flip profits if valuations get out of hand. If you’re a believer in the long-term business models, consider holding a portion of your investment for the long-term.