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Lyft Outlines IPO Plans That May Pay Big for Some of Its Drivers

Lyft Outlines IPO Plans That May Pay Big for Some of Its Drivers

By Hamza Shaban, The Washington Post | Updated: 2 March 2019 11:01 IST

Lyft earned $2.2 billion (roughly Rs. 15,600 crores) in revenue last year, doubling what it made in 2017

Highlights

Lyft losses have grown to $911.3 million in 2018
Lyft drivers have the opportunity to cash in
Regulatory filing reveals Lyft has completed more than a billion trips

The ride-hailing company Lyft filed paperwork Friday with Securities and Exchange Commission, closing in on its highly anticipated initial public offering. And, in an usual move, it had a little something for its drivers.

Lyft said it earned $2.2 billion (roughly Rs. 15,600 crores) in revenue last year, doubling what it made in 2017, according to the regulatory filing. But it said its losses also have grown, reporting a net loss of $911.3 million (roughly Rs. 6,470 crores) in 2018, compared with $688.3 million (roughly Rs. 4,900 crores) a year earlier. The company's history of losing money was listed as a risk factor, along with intense competition, and it said there would be consequences if the work status of its nearly 2 million contract drivers is challenged by regulators or the courts.

As part of the IPO, Lyft is giving its drivers an opportunity to cash in. Those who have completed more than 10,000 rides are eligible for a cash bonus of $1,000 (roughly Rs.71,000), which can be used to purchase stock at the IPO price. Drivers with more rides will qualify for larger payouts, according to the filing.

The bonus programme is notable because ordinary investors are typically excluded from purchasing a company's stock at the IPO price before shares trade on the open market. So the plan elevates drivers above the general public. But it also highlights the ongoing tension between the ride-hailing companies and their millions of drivers. The people who shuttle customers around are not employees. And while the companies are valued in the tens of billions of dollars, they don't grant contracted drivers the full benefits of employment.

Its chief rival, Uber, also is planning to offer a bonus and stock purchase plan to qualifying drivers with its IPO, which is expected later this year, according to the Wall Street Journal.

Lyft said it has completed more than 1 billion trips in the more than 300 markets in which it operates. But it warned investors that its expenses are likely to grow as it continues to expand and refines its mobile platform.

The company is among several high-flying technology companies expected to go public this year. Lyft casts its business in revolutionary terms - pitching its app at the forefront of a technological transformation and shifting ideas about transportation in America.

"We believe that the world is at the beginning of a shift away from car ownership to Transportation-as-a-Service," the company said in its regulatory filing. "Lyft is at the forefront of this massive societal change. Our ridesharing marketplace connects drivers with riders and we estimate it is available to over 95 percent of the US population."

Lyft said it is only at the very early stages of tapping into the trillion dollars spent every year on transportation in the US.

Key to the company's strategy for growth is expanding its pool of riders. The company aims to attract new customers through discounts and referral programs, and is banking on demographic shifts in which a growing percentage of the population relies on on-demand apps. To entice existing riders to use the service more often, Lyft will offer subscription plans and commuter services, according to the filing.

Lyft highlighted the company's investment in technology as another crucial aspect to its growth strategy. The company's app generates troves of consumer data, and the service has poured funds into mapping, in-app navigation, and payments to improve its efficiency and safety.

But Lyft warned investors that the company may suffer if other tech initiatives fail to pan out. The company listed an inability to develop its own autonomous vehicle technology, or to partner with firms who can, as a risk factor to the business. Another point of concern: the nascent market for shared scooters and bikes, which may not take hold.

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