Carl Icahn announced Friday that he plans to invest $100 million in Uber’s rival Lyft, which, according to the investor, is incredibly undervalued at $2.5 billion. Icahn also said that Lyft Inc was a “tremendous bargain” since its opponent is currently valued at $41 billion.
To this day, the two companies have led a ferocious fight to win the hearts and pockets of their customers. Although Lyft and Uber are well known for fiercely competing on prices, luring each other’s drivers, and unfairly implementing stolen technology from one another, the billionaire said that there was plenty of room for both.
He didn’t seem concerned that the two companies operate on the fringe of the law, or that Lyft covers only 65 cities, while its rival operates in 300 of which many are abroad.
Moreover, Lyft signs the payrolls of 400 employees, while its rival has nearly 4,000. So, it is yet unclear whether Lyft is a worthy opponent for Uber. Additionally, Lyft only raised $1 billion in capital, while Uber raised five times the sum.
But revenue evolution look quit similar in both companies. Uber expects a net revenue of nearly $2 billion for this year, which is a 500 % increase from 2014, when the firm reported no more than $400 million. Lyft, on the other hand, forecasts $800 million for this year, which represents a rise of 600 % since last year when it reported $130 million.
Both companies declined to comment on their financial expectations.
However, Icahn does not usually invest in start-ups with unclear prospects such as Lyft. He is mainly focused on big publicly traded companies and mature businesses. So, Lyft may hold indeed great potential unless the billionaire is bluffing.
For him, risking 100 million is like a drop in the ocean when we take into account his $32 billion worth of stocks at big name companies such as Apple Inc., CVS pharma and EBay.
Yet Lyft currently tries to attract more customers by offering superior customer service and loyalty bonuses. The company said that Southwest Airlines employed a similar tactic in its early days which eventually paid off.
Lyft hopes that Icahn’s involvement with the company would brush up its public image and help it with fundraising.
“As we look to the future to raise capital, whether it’s next year or whenever, that’s going to be a large validation,”
said Lyft’s president.
But adding more investors may be tough for Lyft because Uber already signed agreements with its shareholders to not invest in its competitors.
Image Source: BK Mag
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