LYFT off

Against all my good judgement, for the first time, I decided to buy into the first day of an IPO. After the initial euphoria it became clear why people always warn against buying into the first day of the IPO. Down 10% from its peak of the day, I am licking my wounds on day 1.

So here I document my rational for getting into this trade. I call it a trade only to remind myself that this was not supposed to be a long term investment and was only based on a couple of market conditions that I suspect will keep LYFT afloat for the trading period. If the first day is any indication I might be sorely mistaken.

LYFT is at the beginning of a IPO barrage coming up in the next few weeks. Will all these big unicorns in the pipeline I find it unlikely that anyone will want to see LYFT fail and spoil the chances of all other unicorns. In fact, I would imagine that the market would support prices to make the entry of the others in the wings to enter the market smoothly. This pipeline includes star studded names such as Pininterst, Slack and Uber. There is too much private equity money that needs to get out at a good valuation for this to be botched up.

LYFT is a pure play for the ride hailing business and this is my far the first opportunity that fund managers and investors have had a chance to participate beyond the private markets. I believe there is allocation to LYFT coming int he next few weeks or months that should bring up LYFT.

Now all this can go out of the window if anyone uses valuation metrics to value LYFT. At 25 times revenue and with losses of 50% of revenue, the 24 billion valuation of LYFT is not pricey but ridiculous. But here I am planning to hold LYFT for the "bigger fool theory" for the next few weeks or maybe a couple of months. Ideally I would like to exit the trade the week Uber goes public.

Butterflies in my stomach does not begin to describe my emotions as I hold LYFT.


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