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Last week, ahead of the Uber and Lyft earnings releases, we covered Wall Street’s consensus estimates for each company’s Q2 performance. As a recap, please see below for what Wall Street was expecting from the two ridesharing pioneers:
Lyft Q2 Earnings Expectations
Earnings Date: Wednesday, August 7, 2019
Quarterly Revenue: $810 million
Monthly Active Users: 20.9 million
Earnings Per Share: $1.15 loss
Uber Q2 Earnings Expectations
Earnings Date: Thursday, August 8, 2019
Quarterly Revenue: $3.4 billion
Monthly Active Users: 98.4 million
Earnings Per Share: $2.03 loss
And how did things actually turn out? Wall Street came quite close on topline growth and monthly active users but was far off the mark when it came to forecasting the bottom line. In sum, Lyft solidly exceeded estimates and also raised its 2019 forecast, while Uber’s revenue grew more slowly than expected as it lost over $5 billion in the quarter. Please see for details below:
Lyft Q2 Actual Earnings
Quarterly Revenue: $867 million (7% beat)
Monthly Active Users: 21.8 million (4% beat)
Earnings Per Share: $0.68 loss (41% beat)
Uber Q2 Actual Earnings
Quarterly Revenue: $3.2 billion (6% miss)
Monthly Active Users: 99 million (1% beat)
Earnings Per Share: $4.72 loss (133% miss)
Unsurprisingly, Lyft and Uber share price performance diverged quite a bit after earnings were announced. Lyft’s shares rose as much as 13% in after-hours trading last Wednesday but have since reverted to the company’s pre-earnings share price of around $58 after announcing that its post-IPO lock-up would be expiring on August 19 instead of sometime in September. In contrast, Uber’s share price fell by nearly 12% after market close and has since fallen to under $37 per share, below its pre-earnings share price of nearly $40.
Despite contrasting Q2 performances, each of Lyft and Uber remain clear disappointments for their IPO investors, with both companies trading significantly below their public offering prices of $72 and $45 per share, respectively. However, given the market we at EquityZen operate in, we’re focused on how private investments have performed for our clients.
In Lyft’s case, despite currently trading at nearly 20% below its IPO price, late-stage Lyft investors remain solidly in the money based on where Lyft trades today. Even the company’s June 2018 Series I investors, which include Fidelity and Comcast, are sitting on an approximately 23% unrealized gain. Given Lyft’s contemplated lock-up expiry next week, these investors will soon be able to begin capitalizing on Lyft’s appreciation since the date of their investment.
Source: EquityZen analysis based on review of company corporate filings; returns calculated based on original issue price of each series and market prices as of 8/13/2019
If we go back in time a few funding rounds, private investor returns skyrocket—Series D investors, which include Coatue Management, Founders Fund, and Alibaba, are sitting on a 473% unrealized gain. For all its public markets woes, most of Lyft’s shareholders are expecting a handsome payday once they sell.
Uber, however, remains a disappointment even for many of its late-stage private investors. In fact, investors in its last four preferred stock issuances are facing the prospect of negative returns at this time. This group includes some very high-profile companies and institutions, including Microsoft (Series F investor), Saudi Arabia’s Public Investment Fund (Series G investor), and Toyota (Series G-2 investor).
Source: EquityZen analysis based on review of company corporate filings; returns calculated based on original issue price of each series and market prices as of 8/13/2019
Even SoftBank, which was able to bring down its blended original investment price in Uber to $34.49 (largely through a massive secondary purchase of Uber’s common shares), would expect under a 6% return if it were to sell some of its Uber holdings today. To put the SoftBank investment into context, the Japanese giant invested over $8 billion into Uber through its record-breaking Vision Fund. At over 8% of the Vision Fund’s committed capital, Uber is an incredibly important investment for SoftBank. Unfortunately, the Vision Fund’s current unrealized gain on Uber wouldn’t even cover the 7% interest payment owed to the Vision Fund’s preferred shareholders. SoftBank has been publicizing a 62% equity return on its Vision Fund as of July, but this statistic of course rests largely on unrealized gains and comparatively small exits in Slack and Guardant Health (in total, both of these investments comprise less than 1% of the Vision Fund), among others.
Although they would never admit it, SoftBank may be feeling the pressure as Uber flounders and another massive SoftBank bet, WeWork, faces IPO skepticism (a story for another day). We acknowledge that SoftBank has at least a decade before the Vision Fund winds up, and WeWork and Uber may turn out to be remarkable investments. However, SoftBank has decidedly much less time than the Vision Fund’s life to convince investors to hop into its Vision Fund 2, and prospective investors will be watching Uber and WeWork closely in the coming months. Masa openly invests in his portfolio companies’ rivals—when buying a part of Chinese ridehailing giant Didi, perhaps he should’ve also bought some of Lyft.
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