Eager investors are hoping the Lyft IPO will be their next opportunity for market-beating gains this year.
Unfortunately, you won't be able to invest in Lyft stock right now because the IPO hasn't happened yet. But that doesn't mean there isn't a way to profit off the most exciting companies on the market...
The Lyft IPO remains one of the most anticipated public debuts ever, though.
At the end of 2017, Lyft announced that it had reached 500 million rides. It has also been chipping away at Uber's market share in the United States.
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At the beginning of 2017, Uber dominated the U.S. market with an 80% market share. By the end of October, that had fallen to 70%.
But if you're thinking about jumping into the Lyft IPO in 2018, there is much more to consider than just the company's growing share of rides. And there's an even better way to get in early on the most popular IPOs...
What We Know About the Lyft IPO
A San Francisco--based ridesharing company, Lyft was founded in 2012 by Logan Green and John Zimmer. The two co-founders were no strangers to ridesharing apps. They began with a company aimed at helping college students connect for long-distance carpools, called Zimride.
In 2013, the two sold Zimride to Enterprise Holdings for an undisclosed amount and decided to concentrate their efforts on Lyft. Considering the progress they have made in the past five years, it was a wise choice.
The ridesharing company reported 53.3 million rides in 2015. It boosted those figures 136% in just one year to 162.6 million rides in 2016.
And now Lyft is chipping into the market share of its main rival - Uber.
Uber has faced a seemingly never-ending string of troubles over the past year and a half. Even with a new CEO, Uber is struggling with a negative reputation, and Lyft now claims a 35% market share.
Lyft has modeled itself as the fun, friendly rival to Uber's troubled brand. Throughout 2017 and into 2018, more riders have become "brand aware" of Lyft, and this accounts for many of its new activations.
Plus, Lyft is expanding internationally. Specifically, the company started operating in Toronto on Dec. 12, and Ottawa was recently added as well.
Lyft is also forming some unique partnerships. In February 2018, the company partnered with Baltimore Bike Share to transform some of its bike-share stations into Lyft drop-off and pick-up spots.
The company is also appealing to clients through its philanthropic efforts. When a rider pays for their fare, they have the option to "round up" to the nearest dollar to donate that difference to charity. In 2017, Lyft raised $3 million with this program.
In its most recent funding round, Lyft brought in an additional $1.5 billion in financing, bringing its total from private investors to $4.3 billion. Some of those investors include CapitalIG, Rakuten, Canada's Public Sector Pension Investment Board, and Alliance Bernstein.
The latest valuation for Lyft is $11.7 billion, which is making potential investors anxious to buy Lyft stock.
And the Lyft public offering could be soon...
A Lyft IPO in 2018 Is Possible
The Lyft IPO has seemingly stalled for years, but it appears that the company is still moving forward with its IPO plans.
The latest news we have is that the company was looking for an advisory firm last fall to help it choose underwriters for its IPO.
Before you consider buying Lyft stock, however, Money Morning Defense and Tech Specialist Michael A. Robinson has some advice about IPO investing.
He also has a much better investment than Lyft that can help you maximize IPO returns and minimize risk...
Forget the Lyft IPO, and Buy This Stock Instead
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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 lockup 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 Arca: 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) (7.37% of its holdings) than Snap Inc. (NYSE: SNAP) (1.08% of its holdings), for example, it balances out the risk of IPOs. If FPX just owned shares of SNAP, FPX would be down 34.93% so far in 2017. But the PYPL stock price is up 79.86% 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.
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 21.23%. In comparison, the Dow is up only 18.25% in the same time.
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