Ahead of the inevitable Lyft IPO, Google could make a surprise investment in the transportation disruptor.
According to a Sept. 14, 2017, Bloomberg report, a $1 billion investment into Uber's largest competitor might come either directly from Google or from CapitalG, which is Alphabet Inc.'s (Nasdaq: GOOGL) private equity company.
While the details are sparse, the deal has Wall Street buzzing. To land such an impressive investor would be a bragging point for Lyft as it pitches an IPO to large investment firms.
Here's everything we know about the potential investment and what it means ahead of the Lyft IPO date...
A Google Investment Would Be a Big Win Ahead of the Lyft IPO Date
Lyft and Google have a strong relationship, so this $1 billion investment could be more than just a rumor.
In May, Google's self-driving car unit, Waymo, signed a deal with Lyft to collaborate on self-driving car technology. Then in July, Lyft announced it was launching its own autonomous-car division, and Waymo would be one of its partners working with the unit.
And there's one big reason why Google may be cozying up to Lyft...
The tech giant is a fan of the ride-hailing space, as it invested $258 million in Uber in 2013. However, the relationship has soured, as Google has accused Uber of stealing Waymo's intellectual property.
Through an investment in Lyft, not only will Google maintain a footing in the ride-hailing industry, but a $1 billion investment in Lyft will also be a slap in the face to Uber.
But does Google's potential investment alone make Lyft stock worth buying?
Here's what you need to know about investing in Lyft stock, plus a bonus profit play you need to know about today...
Read This Now Before You Buy Lyft Stock
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Money Morning Director of Technology & Venture Capital Research Michael Robinson doesn't believe retail investors should invest in overhyped IPOs.
"I generally tell retail investors to avoid buying an IPO at the open because the insiders have already made all the money available at the debut," Robinson said.
You see, prices can soar for a few days after a company goes public, which nets early investors the biggest gains. However, retail investors are often buying in at an inflated price, and stock prices after a public offering can be extremely volatile.
But he has one exception...
"My exception to this rule is to put in a limit order that is fairly tight from the offering price. Otherwise, the risk is you buy at the top and then go upside down. That's a big risk to carry with a new issue that hasn't hit the lock-up date," Robinson said.
However, we have one strategy that lets you safely profit from the hype these IPOs create, without the risk that can come with buying at the IPO price.
Robinson advises investors to purchase an exchange-traded fund (ETF) that mimics the broader market for IPOs. It's the First Trust U.S. Equity Opportunities ETF Fund (NYSE: FPX).
Because FPX is an ETF, retail investors can buy and sell it just like a stock.
And because FPX holds a mix of recent IPOs, it's diversified. That makes it less risky than owning just one stock.
Because FPX owns more of PayPal Holdings Inc. (Nasdaq: PYPL) (6.81% of its holdings) than SNAP (1.05% of its holdings), for example, it balances out the risk of IPOs. If FPX just owned shares of SNAP, FPX would be down 40.20% so far in 2017. But PYPL stock price is up 62.71% so far in 2017, and it accounts for a much larger position than Snapchat.
According to FTPPortfolios.com, FPX's holdings include the 100 largest and most recent U.S. public offerings.
It currently holds IPOs that rolled out over the last several years, including Snap Inc. (NYSE: SNAP), Match Group Inc. (Nasdaq: MTCH), and Blue Buffalo Pet Products Inc. (Nasdaq: BUFF). And it also holds newly spun-off companies like AbbVie Inc. (NYSE: ABBV).
This structure lets you profit from IPOs and new public companies without the risk of owning just one stock. And for investors looking to outperform the market with safe investments, FPX is beating the Dow right now.
This year, FPX has climbed 18.86%. In comparison, the Dow is up only 14.57% in the same time.
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