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Lyft Is Trying To Beat Uber To The IPO Punch

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Word just got out that Uber is trying to go public at a $120B valuation. But it looks like Lyft is trying to beat its arch-rival to the punch!

The Wall Street Journal just reported today that Lyft picked a dream team banking squad led by JPMorgan Chase to lead its IPO, scheduled for early ’19.

Lyft’s banking on a market cap well above $15.1B, the valuation it scored in its latest private funding round in June so investors can hit their ROI targets.

And yes, Uber will be worth around 10x that but it would be a major score for Lyft to beat its ride-hailing foe to the public markets.

Ah, the IPOs!

Just like 1980’s Hulkamania, IPOs have been running wild in 2018.

VCs are getting their 10x, investors get in on the action, and founders get stinky rich. Oh yeah, baby. And even though most of them are unprofitable, they’re still scoring massive market valuations.

So when is this gonna go down?

As of now, Uber’s worth $70B. They’ve said all along they’ve planned to pop the public markets in the second half of 2019.

But according to the WSJ report, they could speed up their schedule and go live on the public markets as early as next year. Apparently Uber received valuation proposals last month from a Wall Street goon squad of their own in Goldman Sachs and Morgan Stanley.

This is often the final stage before a company officially hires a bank to underwrite its offering. As expected, Lyft and Uber both declined to comment.

Why are they fighting to go first again?

Well, there’s no sophisticated reason behind other than the obvious. Even though it’s worth less, Lyft wants to offer ride-sharing stocks first before a competitor gets to satisfy market demand for the hot industry.

Here’s a thing to watch. Lyft is US and almost car-only. Although it’s making its play with its direct-to-user micromobility play with bikes and electric scooters.

Uber, on the other hand, is worldwide, operating in 600 cities in 78 countries. Uber’s even teaming up with taxis around the world and ish.

(Editor’s note: Watch out for tomorrow’s lead story on that!)

UberEats > Lyft

Another factor to consider. Uber’s UberEats—their fast-growing food delivery service—alone (rumored at $20B) could be worth more than Lyft as a whole.

Here’s the kicker: Morgan Stanley and Goldman Sachs’ valuation targets reportedly come from Uber’s non-rides businesses. In other words, Uber’s valuation doesn’t even come from its core business.

Let that sink in for a second.

Should Lyft beat Uber to the punch, that obviously is a huge win. Despite its smaller business, when it comes to hitching a paid ride, US app users look at Uber, then look at Lyft.

On the other hand, should Uber pull off the IPO first—especially in light of this news—going public would mark a huge symbolic victory for CEO Dara Khosrowshahi who took the reigns last summer on the heels of #MeToo scandals and a mass executive exodus. 

Business

The Most Hyped Startup Is Now Worth $45B

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Co-working rental startup WeWork has secured an additional $3B in funding from SoftBank, at a valuation worth nearly $45B. In a surprising move, SoftBank’s latest investment will more than double the startup’s valuation from the $20B figure it clinched during its last financing round.

The valuation will also drive a global co-working behemoth, bigger than Airbnb, PWC, SpaceX, or Ford Motor, making it the second most-valuable startup in the United States after Uber.

The capital injection comes at a time when WeWork’s losses are on a steady climb, recently ballooning to $2B on an annual basis. The investment from SoftBank, the startup’s largest investor, will also increase its cash pile and commitments to almost $6.4B.

Critics, however, claim that the valuation is highly inflated compared to other real estate players in the market, and remarked the startup might face an issue if their earnings fail to justify the excessive valuation.

Despite the possibility of headwinds in the short-term, WeWork’s vice-chairman Michael Gross was positive on the company’s long-term growth.

“Our view is that there is tremendous wind at our back — we are the only serious global player out there,” he said. “Our growth is actually accelerating as our product offering continues to go deeper and reach not just small-sized companies but Fortune 500 companies and everything in between.”

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The Rise Of Algorithmic Trading: How Manned Trading Desks Are Seeing Their Demise

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One of the last human points of resistance to the algorithmic take-over of professional trading can be found in the fixed-income trading desk.

The deft relationship business is known for having participants with Ivy League pedigrees and a lacrosse playing background, a data point that a machine learning algorithm recently used when making hiring recommendations.

With an algorithmic transition, profit margins are being squeezed as human relationships are becoming less important. Benchmarking the transition are new hiring mandates at some of the largest banks, a recent Greenwich Associates report pointed out.

Relationships and fundamental market understanding are less important, the report noted, and algorithmic experience and data science skills are now in demand.

In this emerging environment, what are best practices for an integration framework?

When combining fundamental investment thinking with quantitative thinking unique conflicts often arise. Fundamental, discretionary fund managers often creatively connect non-correlated dots and sometimes challenge consensus thinking.

Quantitative logic, on the other hand, is often driven by if-then Boolean logic at its core and looks for mathematical consensus to guide decisions. Mixing these two disciplines can be like expecting oil and water to enjoy each other’s company.

“Relationships and balance sheet still matter, of course,” Greenwich Associates Managing Director Kevin McPartland wrote in a report title that highlights a dichotomy, “Trust and Data Drive Fixed-Income Dealer Growth.”

Trust is a human concept and data is often associated with empirical, mathematically discovered understanding is the point where a melding of the minds might occur.

The integration of the two highlights the new path forward. “But the ability to manage both in a more quantitatively driven way can mean the difference between profit growth and a year-on-year decline,” McPartland observed.

Technology is increasingly becoming an important feature on bond trading desks, particularly for sell-side banks. Fully 91% of bulge bracket banks said automating parts of the trading process was one of their “top technology priorities for 2018,” the Greenwich Associates report pointed out.

Only 44% of middle market participants, meanwhile, felt the same. This group was having slightly more difficulty “complying with new/changing regulations” and was more focused on improving client management tools and data.

Knowing what technology to integrate so as to deliver a near-term positive return on investment while positioning the firm for a longer-term shift in intelligent automation can prove challenging and, itself, might have variables that don’t easily fit into a math formula.

“Assessing the process of tech integration is always a challenge because no technology is perfect, but it is often much better than human performance,” said Evan Schnidman, CEO and Co-Founder, Prattle, a firm that uses machine learning techniques to analyze human speech patterns to provide a market edge.

Electronic equities trading has proven to be highly reliable, but very rare missteps can have catastrophic cascading effects. With bond trading, and any other technology-driven process in financial services, it is vital to build appropriate circuit breakers and human checkpoints. Simply, technology is a valuable tool, but humans still need to be in the loop.”

When integrating technology into a bond trading workflow it is important to set proper expectations that can be measured on a project plan timeline.

Often times expecting the unexpected is a discretionary skill that requires understanding technology’s limits.

“The best practice in tech integration is to remember that technology will not solve all of your problems, but it may be able to streamline the human workflow and optimize decision making,” Schnidman said. “If institutions keep that in mind, they are likely to adopt technology more readily, thereby making each additional innovation less jarring from a tech integration standpoint.”

With technological change coming at an increasingly rapid pace, the imperative is in understand what aspects of human trading can be modeled and what should remain discretionary.

“Instead of fully relying on quantitative approach at the beginning, it is a good starting point to integrate the output of quants and AI models in the human decision making process of position taking and dealing,” said Tsuyoshi Yokokawa, founder and CEO of San Francisco based Alpaca Markets, a firm that in parts helps integrate quantitative trading models into fundamental trading methodologies.

As the last refuge of human-based trading turns algorithmic, the processes and methodologies that drive these projects are likely to determine success or failure to a large degree.

In bond trading, the sell side is taking a different approach to that of the middle market.

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Alibaba’s Singles Day Records $31B Sales, Trumps Amazon’s Biggest Day

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Chinese tech and e-commerce behemoth, Alibaba, saw its one-day shopping event draw sales worth over $31B, setting a new record for the company. Labelled as its Singles Day event, the day records sales that’s bigger than Black Friday and Cyber Monday combined.

The record sales in under 24 hours dwarfs the $4B in sales Alibaba’s rival Amazon garnered during its Prime Day sale earlier this year.

Here’s why Alibaba’s CEO believes the sale is a huge winner for the company.

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