Hi everyone,

Hope the month of April will be great for you all.  In this month’s blog, I like to discuss the first major IPO of the year 2019, LYFT. A lot of hype for a company that hasn’t turned a profit yet. It’s IPO was priced at $72 per share and it raised $24 billion. Why did it raise so much when it had continuing, rising losses, low barriers to entry and most importantly, no network effects? Many analysts stated that Facebook succeed mostly due to its network connectivity.  LYFT does not have that.  For instance, while Facebook users might not like its privacy policies, they still tend to stay because their friends are there.  As we know about supply and demand, the more people who use it, the more money it can generate from advertising.  Further, Facebook continuously adds new features which keeps users staying on. Now regarding LYFT, its drivers can be working for both LYFT and UBER. To the drivers, it really doesn’t matter which app the passengers use. Furthermore, LYFT tends to focus on commuters seeking to go to work.  That is their bread and butter.  Knowing that, it is easy for competitors to focus on particular cities and take that business away. What is most disconcerting is that revenues are growing and at the same time, losses are growing as well.  We all understand that the brick and mortar models don’t add up today in valuing these types of organizations.  In closing, the world of valuation is more complex as ever. Enjoy the ride!!! Until next time………………………..

Joel

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