Lyft IPO Valuation (March 2019)
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NamePotential Market (in millions)CAGR in MarketMarket ShareShare of Gross BillingOperating MarginCost of CapitalIPO ProceedsValue of EquityValue/ShareValue of EquityValue per share
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Aswath Damodaran$120,000.0010.39%40.00%20.00%15.00%9.97%$2,000.00$16,401.00$58.78Average$11,391.01$41.24
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Tim LeGendre$75,000.006.00%20.00%-%9.00%8.83%$2,000.00$8,073.97$33.56Median$13,023.94$46.68
notes? : I see lyft staying mostly a US taxi, ride share, maybe some transit, and also some partial ownership in cars type of deal. Margins were tough, I took current GROSS at 42%, SG&A at 74% and R&D at 14%. The problem with this company is that it is trying to be a technology company in industries that aren't heavily high margin, as far as the past is concerned. As far as a new "blue ocean" market, all I have is assumptions. I took Gross Margin up to 52%, this was hard for me. I do see margins going from 18% in 16, to 38% in 17, to 42% in 18, but going up to 52% seemed tough. I deemed this partly a software industry type play, so going up to 64% gross margin averages wouldn't be too tough, hence, I short cutted and met in the middle at 52%. I took SG&A from 74% down to 32% This was extremely tough as well, because not too many companies run at 32% and definitely not today's tech/software companies. Lastly I took R&D from 14% down to 11%, scaling and efficiency in their app allows them to spend less. All told, I had to squeeze hard to get them to 9% EBIT MARGIN. For beta, I started a little weird, I looked at food distribution as kind of a guide. I used .78 as a base beta, and adjusted for negative return on capital, but zero debt that I saw on the prospectus, I got to 1.11. My COE was 8.84% using 1.11 beta, 5.58% ERP, and finally 2.719% on the 10y. Cost of debt was 7.22% based on possible bond rating of b+ with a default spread of 4.5%. This was really generous. Short operating history and negative profit margins wouldn't really be this good of a rating, unless you are tesla. I didn't have a figure for D&A and CAPEX. So I justed used Capex at 250 million and D&A at 200 million. I had this just slowly just falling down to an average and being the same in year 10. Working captial, I wasn't able to really work on, so I left that blank. I left interest blank, which is also extremely optimistic. I imagine this company will be tapping the convertible markets in a couple years. For reinvestment I had them scaling up in terms of how good they are with investments, eventually having them be at a 2.5 sales/capital ratio in year ten, I also have roughly a 22.5% ROC in that year. First I took the FCFE and came up with roughly $34 a share. Then I used that as the equity value to decide the true weighted COC, which, without debt is pretty much the same COC 8.84%. I also capitalized their operating leases to a tune of a PV of 322.93 million. I took that debt out of my firm value, added the proceeds, and cash and came up with 8073.97 I then divided by the amount of shares they report to have outstanding at the time of IPO: 240,597,591. I didn't take into account an RSU's or options, because they didn't give me any information on those. I also didn't adjust my price based on it looks like A shares won't have the same voting power. Lastly I did adjust for a 15% chance of faliure and them getting 75% of the going concern value of FCFF. My COC goes from 8.84% down to 7.07% in year ten. I feel very generous with this. I think that in the end I have a low value because I'm stretched to find the margins in this buisness. In conclusion, this is a conseritive estimate, I feel neutal in terms of bias, I've never used lyft, and I had an uber once but someone else did it and paid for it, I was a tag along. I live an an urband area where neither service is really even used or offered. I spoke to an uber drive once, but don't remember the conversation. I say this because I don't have any preferrences or knowledge of inner city ride sharing.
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Nazir Tarraf$250,000.007.26%25.00%10.00%25.00%10.00%$2,000.00$15,795.81$56.61
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Hiroki Yamamoto$120,000.0010.39%30.00%20.00%25.00%12.03%$2,000.00$17,950.49$64.33
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Arnab Khasnobis$250,000.0010.39%15.00%15.00%15.00%8.24%$2,000.00$10,414.68$37.32
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Daniel Sulkin$120,000.007.26%25.00%15.00%-20.00%10.00%$2,000.00-$5,485.02-$19.66
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Francesca DeLucia$120,000.0010.39%25.00%20.00%15.00%9.97%$2,000.00$8,266.65$29.63
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Alex Wei$200,000.0010.39%25.00%15.00%15.00%9.97%$2,000.00$13,023.94$46.68
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Darth Sidious$120,000.006.00%35.00%33.33%20.00%9.97%$2,000.00$16,807.23$60.23
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Levent Touter$120,000.0013%25%40.00%14.00%8.24%$2,000.00$10,636.20$38.12
AV bull scenario with strong competition
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Rahul Khanna$120,000.0010.39%30.00%20.00%15.00%9.97%$2,000.00$13,416.13$48.08
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