If Lyft wants to beat Uber to an IPO, it needs to go public and start selling shares of Lyft stock by 2019 or earlier. Uber's new CEO, Dara Khosrowshahi, wants to take Uber public between 2019 and 2021, which means Lyft will have to move quickly.
But if Lyft does go public before Uber, does that mean you should buy Lyft stock?
Here's everything you need to know about the ride-sharing industry, including how to profit before Lyft stock goes public...
The Most Important Details About the Ride-Sharing Industry
Both Lyft and Uber are disruptors who have remade the transportation industry. The smartphone-based platform is replacing a system of random taxis that need to be hailed in the street.
But even though they have similar business models, Uber is still considered the more valuable company. Right now, Uber's valuation is estimated at $70 billion.
Lyft is valued at $7.5 billion.
But Uber has also been under fire for most of this year over recent scandals. The company was rocked by a number of issues, including being sued by Alphabet Inc. (Nasdaq: GOOGL), facing allegations that it used a tool to evade regulation, and dealing with employee reports of a culture of bullying and sexual harassment.
Who Is the New Uber CEO?
The number and depth of issues this year led to then-CEO Travis Kalanick taking a leave of absence and eventually stepping down.
In comparison, Lyft's business has been thriving...
Lyft Increases Passenger Rides and Business During Uber's Scandals
Lyft has rapidly increased its completed rides, going from 53.3 million in 2015 to 162.6 million in 2016.
That's a 136% increase in one year.
Also, Lyft may be gaining more market share thanks to Uber's scandals. Once Uber's troubles started, the company lost market share to rivals like Lyft. Between January and May, Uber's U.S. market share dropped from 84% to 77%.
And while Lyft isn't profitable now, Bloomberg projects it could be by 2018. In comparison, Uber may not be profitable until 2021.
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But just because Lyft could become profitable and go public first, does that mean you should buy Lyft stock?
Before waiting to invest in the $7.5 billion company, check out how you can profit from IPOs starting right now...
The Better Way to Profit Than Buying Lyft Stock
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Money Morning Director of Technology & Venture Capital Research Michael A. Robinson advises investors that investing in IPOs can be risky and puts regular investors at a disadvantage.
When a company goes public, only wealthy and institutional investors can purchase the stock at the IPO offering price. Retail investors have to wait until the market opens on the IPO date and pay the market price.
For example, Snap Inc. (NYSE: SNAP) set its IPO offering price at $17. Retail investors that bought at market open on March 2 had to pay $24 per share. If those same retail investors still held their shares today, they'd be down 36.66% from their original investment.
Robinson recommends that investors who want to buy Lyft stock on the IPO date only do so with a limit order that is as close as possible to the IPO offering price.
This will ensure that you don't overpay for your shares and limit your downside.
But there is still a way for risk-averse investors to profit from the IPO market...
The First Trust U.S. Equity Opportunities ETF (NYSE Arca: FPX) is an exchange-traded fund (ETF) that trades exactly like a stock. But unlike owning a single stock, FPX is a diversified mix of recent IPOs and newly spun off companies.
The diversification helps to offset losses from any one stock. This gives you the upside of an IPO without the risk of buying in early on another SNAP.
The ETF holds a total of 102 companies, and it rebalances its holdings quarterly. Its top three holdings according to allocation include AbbVie Inc. (NYSE: ABBV), Kraft Heinz Co. (Nasdaq: KHC), and PayPal Holdings Inc. (Nasdaq: PYPL).
So far in 2017, the FPX stock price has climbed 17.13%. In comparison, the Dow Jones Industrial Average is up just 11.92%.
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