By on March 29, 2019

Back in 2016, General Motors invested half a billion bucks in Lyft, the rideshare company bent on taking Uber to school. When the deal was made, the companies portrayed it as a long-term strategic alliance. Since then, investments have been made in Lyft by GM’s competitors (namely Ford), and GM has made investments in potential Lyft competitors like Cruise Automation. Pro tip: don’t try to draw this particular family tree.

Today, Lyft went public on the stock market, seeing an astounding open of $87.24 a share. As a gearhead, why should you care about this? Well, remember that investment GM made in the company? The General now owns 18.6 million shares, which now translates into a net value of over $1.5 billion.

In a company besieged by idling plants and layoffs, suddenly finding an extra billion-and-a-half bucks on the books is surely a big deal.

It’s not as if GM can make like a Vegas winner and immediately cash out, however. To my understanding, the company cannot sell its stock for a period of six months after the IPO. Given market and socioeconomic volatility, who knows what Lyft’s stock price will be this autumn. However, some back-of-napkin math reveals that the stock would have to fall to just $26.88 in order for it to be worth less than the $500 million General Motors invested in the company three years ago.

Lyft’s stock is sure to fluctuate wildly over the days and weeks ahead before settling in to something remotely resembling an even keel. Since its IPO this morning, the price has bounced around like a proverbial rubber ball, currently sitting at $80.62 as of this writing. Even if GM eventually sells off some or all of its shares, it is unlikely they’ll sever ties with Lyft entirely.

You know all this has to rankle the corner offices in the Glass House, as Ford’s stock price has been languishing under $10 for ages. So far as they’re concerned, they’ve been innovating and powering their way to a portfolio of desirable vehicles only to see Wall Street reward yet another start-up (ish) company with gonzo valuations. It must be frustrating. For its part, GM stock sits around $37 today.

Keep in mind that GM also has its corporate fingers in the pies called Maven and Cruise Automation, so trying to tease out Lyft’s role in the company’s future plans is like trying to untangle a ball of fishing line that’s been sitting in the bottom of a tackle box for months.

Beyond General Motors, companies like Google (12.8 million shares) and Fidelity (about the same investment as GM) also stand to make a few bucks from Lyft. One thing’s for sure – the line between traditional automakers and new mobility solution companies is quickly being erased.

[Image: Lyft]

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14 Comments on “Lyft You Up: Rideshare IPO Could Mean Big Payday for GM...”

  • avatar

    Another internet company that produces a service, has employees that lose money producing that service, sell asap, this will be another blue apron. I also predict gm will be at break even in 6 months.

    • 0 avatar
      Peter Gazis

      GM will still have the $2.2 billion Honda is giving GM, and $2 billion more from SoftBank of Japan.
      (investment in Cruise automation)

      • 0 avatar

        That is over a many year period, and I would bet that gm will screw it up eventually and Honda pulls out.

        • 0 avatar

          Honda is behind so they had to find someone to invest in.

          Honda’s own self-driving development program isn’t close to anything like that. The company said last year that it likely won’t release its first Level 4 self-driving systemuntil 2025. (A “Level 4” system is one that is limited, typically to areas that have been carefully mapped. You can learn more about the “levels” of autonomous-vehicle technology here.) Motley Fool

  • avatar
    Master Baiter

    Years ago I read somewhere that GM would be better off shutting down auto operations and investing all its capital in municipal bonds.

    • 0 avatar

      That pretty much holds for everyone wasting resources on attempting to do something productive in fully financialized dystopias. In such places, it’s always more lucrative to be in on the graft.

  • avatar

    Sell the shares now Ms. Barra and pay it out as a dividend. Both Lyft and UBER have a serious battle on their hands trying to convince their drivers they are “independent contractors”.

    I would have thought the UAW would have taught you more by now.

  • avatar

    Lyft is burning through investor cash at about $1 billion per year and has never made a profit (or even came close – 2018 loss was $911 million). With the new $2.3 billion in Lyft’s checkbook, it has about 2+ years of cash to burn up without making a dime.

    Crazy stuff.

    Oh, the stock dropped over 10% at close today. Hang on for the ride!

  • avatar

    What causes these companies to loose money? They’re basically an app. The profit model should be good seeing as they don’t have any costs above the software programing and their servers. Do they just spend all their money on development into autonomous vehicles?

    • 0 avatar

      You mean lose money.

      Overhead, big salaries for the exec’s, staff for hiring drivers, maintaining insurance, etc, etc. Plus, they just piss away money on stuff that won’t talk about. It’s the new business model in the US….use up investor funds until no one will loan you another dime.

    • 0 avatar

      MBella, there are plenty of reasons why they lose money (l know “lose” was what you meant), but the primary reason is that while they move into market after market, the pricing to the customer is the main driver to profitability. I remember when UBER started, I was doing a lot of business in SV, and I don’t think I’ve ever rented a car since. Maybe one of my employees did, but since I had an office in LA, I simply quit driving out there.

      Both companies have done nothing but contribute to the congestion in NYC, another place I visited often. But even with surge pricing, whatever, the drivers are being paid crap. Both Lyft and UBER have said that they are going to put some paltry amount of cash out to drivers with the IPO, so they can buy stock (you really think they are going to do that?), and they are going to help with maintenance costs, give them help for purchasing new cars, etc., but that won’t make up for the fact that most drivers aren’t even making the Federal minimum wage.

      The courts have been surprisingly supportive of allowing these companies to continue to let them operate as independent contractors, but they will most likely end up in a class-action suit in the 9th District and then all bets are off. A few hundred drivers went on strike in 3-4 cities yesterday, but ultimately no matter what Wall St. thinks, the drivers are the backbone of the service model and autonomous driving is WAY off in the future. Don’t know if you noticed that even our good buddy Elon Musk has completely removed all references to the Tesla Network from their website, when as recently Q4 2018 he still maintained that those customers who paid the $5k for “Full Self Driving” would be able to put their cars into ride sharing and UBER-like services by using the Tesla Network. What a load of bs. When I use UBEREats, I always tip 20-30% because I know they are just filling up their time by delivering some food.

      Anyway, I found this article that might bring some more insight into the issue if you are interested. I’m pretty sick of all of these companies that promise autonomous cars. Even Google is on record that they would have autonomous cars on the road in 2018.

      • 0 avatar

        Yes I meant lose.

        That explains more why the drivers are not profitable, not Lyft or Uber themselves. These two companies should have very little expenses compared to their revenues. Really, their current business model is just an app that provides a forum for drivers to advertise their service to passengers for a fee. It’s the equivalent of Craigslist or a dating app not making money. It’s the driver taking the risk and has the financial liability. There has to be some serious spending on R&D for autonomous cars, or management is taking some serious salaries for them to post a loss.

  • avatar

    Hence why the US as a leading place for manufacturing, and for productive enterprise in general, is by now merely an historical anecdote.

  • avatar

    Well the stock lost 11% today, thanks Mary for not taking my advice, but I know $150 million is pocket change.

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