Brief IPOs & Placements: LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing and more

In this briefing:

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
2. Lyft IPO Preview
3. Sea Ltd (SE US): Placement a Good Opportunity to Enter an Attractive Story
4. Sea Ltd Placement – Capitalizing on Momentum
5. Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports. 

Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.

In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.

2. Lyft IPO Preview

Lyft Inc (LYFT US), a leading US based ride-hailing company, is getting ready for an IPO in the US in the next several weeks. One of the major positives of the Lyft IPO is the timing – Lyft should be able to complete its IPO ahead of its chief rival Uber which is expected to file its IPO later in 2019. 

The financials for Lyft will likely to change significantly in the next five to ten years, mainly due to the increased adoption of autonomous vehicles, which would reduce the need for Lyft to pay for the drivers. This cost can be eventually eliminated with full scale autonomous driving. Although we do not have figures as to exactly how much Lyft pays for all its drivers, in five to ten years when the fully autonomous vehicles are allowed, this could significantly change the basic economics of operating its ridesharing business. 

Potential shares dilution risk from additional rights offering a few years after this IPO is a serious risk for the company. Once Lyft completes its IPO in a few weeks, depending on the institutional investors’ demand for the deal, the company is likely to be infused with several billions of dollars from IPO proceeds. However, the IPO proceeds may not be enough and the company may need to conduct another large scale rights offering in a few years (for example in 2021 or 2022) which may be prior to the fully autonomous vehicles acceptance and regulatory approval by major countries around the world such as the United States.

3. Sea Ltd (SE US): Placement a Good Opportunity to Enter an Attractive Story

Last Friday, Sea Ltd (SE US) unveiled plans to raise around $1 billion (based on the closing price on 28 February) through an underwritten public offering of 50 million ADS. The fundraising was inevitable due to the high cash burn and net cash position.

4. Sea Ltd Placement – Capitalizing on Momentum

Sea Ltd (SE US) is looking to raise about US$1.2bn in its upcoming placement. It will be larger than its IPO in 2017, which raised about US$880m.

The deal scores well on our framework owing to decent valuation, strong price and earnings momentum but had little track record for comparison. The company announced a strong set of FY2018/Q4 2018 results which had beaten estimates. 

Even though, the deal size is large, representing 23.2 days of three-month ADV, there is enough time between the announcement to the end of the bookbuild to price in the impact of the placement. 

5. Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business

Shenwan Hongyuan filed in November to list in Hong Kong. It is a leading brokerage house in China. With an A-share market capitalization of USD 18 billion, the company plans to issue up to 20% of its shares for an A+H listing. In this insight, we will discuss:

• Company’s history.
• Comparison with leading Chinese brokers.
• Our thoughts on valuation.