Lyft’s bankers are trying to compare the ride-hailing app to Grubhub and luxury retailer Farfetch— here’s their pitch to investors (GRUB, FTCH)

John Sciulli/Getty Images for Lyft

• Bankers will compare Lyft to "marketplace" companies like food delivery service Grubhub and luxury fashion retailer Farfetch in their pitch to investors as the company gears up to go public next week, sources said.
• They’ll also pitch Lyft as comparable to high-growth Internet companies like Netflix, as well as "platform" companies like Square and Facebook.
• Which companies Lyft gets compared by investors could have a big impact the company’s price when it IPOs. Lyft said on Monday that it expects to list with a valuation between $21 billion and $23 billion.

Lyft’s bankers will compare the ride-hailing app to everything from a luxury fashion retailer to a food delivery service in their pitch to potential investors during the two week IPO roadshow, which kicked off in New York City on Monday.

Lyft, which is expected to go public at the end of next week with a valuation between $21 billion and $23 billion, is set to be the first ride-hailing app to trade on the public markets.

It’s both a challenge and an opportunity for the bankers leading the company’s IPO, who are charged with helping investors understand exactly how to value the company, and what other publicly-traded firms it should be compared to when evaluating its value. 

Despite Lyft’s ties to the automotive space through its work in autonomous vehicles and transportation technology like electric scooters, people familiar with the process said bankers will pitch Lyft as an Internet marketplace on par with the food delivery platform Grubhub and the luxury fashion retailer Farfetch. Marketplaces are companies which connect sellers of a good or service to customers.

In addition to Grubhub and Farfetch, sources said bankers on the deal will compare Lyft other "marketplaces" including creative goods site Etsy, freelancing platform Upwork, online travel operator Booking Holdings, and home services site ANGI (Angie’s List). 

Some bankers think that Lyft is better suited to being compared to "platform companies" — basically, software companies that have grown based off of their ability to connect large networks of people. These include Facebook, Alphabet, payments company Square and ecommerce platform Shopify. Others are looking to compare the company to other high-growth Internet firms such as Netflix and Argentina’s ecommerce site MercadoLibre, the people said. 

The types of companies that investors choose to value Lyft against is very impactful, as tech companies generally trade at much higher multiples than those in the automotive industry. The car manufacturer General Motors, for example, which owns a stake in Lyft, has a price-to-earnings ratio of 6.87, while Ford has a PE ratio of 9.31. 

Meanwhile Grubhub has a PE ratio of 90.31.

In the case of Lyft, price-to-earnings ratios are less relevant, as the firm loses money. Lyft registered a near $3 billion loss in 2018, with $2.2 billion in sales. 

According to figures from Daniel Morgan, a senior portfolio manager at Synovus Trust Company, Lyft’s IPO range values it at around 6x estimated 2019 revenue of $3.3 billion.

While that’s higher than the comparable ratio for companies like Amazon, Facebook, and Netflix, Morgan said "it’s not ‘too crazy’ when we look at the P/S Ratio’s (price to sales) of other high profile tech names at the time they actually went public."

Snap for example went public at a valuation equivalent to 26.7x times sales, for example, while Twitter went public at 13x. 

Farfetch went public in September 2018 at $6.2 billion — around 16x its 2017 revenue and 10x what it eventually reported in revenue for fiscal year 2018.

More on Lyft’s IPO:

• Lyft is seeking a valuation of up to $23 billion as it embarks on its IPO road show
• 3 unanswered questions from Lyft’s long-awaited IPO filing
• Lyft is using a controversial new stock structure in its IPO that will let its founders keep ‘significant influence’ over the company
• In its IPO paperwork, Lyft gives a weird, whimsical explanation for what the ‘Y’ in its name stands for
• Lyft says its business got a major boost from Uber’s extremely scandalous 2017
• Lyft has to pay Amazon’s cloud at least $8 million a month until the end of 2021
• Here’s who’s getting rich from Lyft’s enormous IPO
• Lyft warns the push to have ride-hailing drivers classified as employees could seriously harm its business
• Lyft just gave us the first look inside its financials — and its revenue is growing much faster than its losses
• Lyft warns that the future of its business depends heavily on bikes and scooters

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See Also:

• $1 billion Sequoia-backed data startup Health Catalyst has picked lead banks for its IPO
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• A top Goldman Sachs sales trader is leaving to take a big role at JPMorgan

SEE ALSO: $1 billion Sequoia-backed data startup Health Catalyst has picked lead banks for its IPO

Source: Business Insider – bpeterson@businessinsider.com (Becky Peterson)