World Markets

Lyft IPO has fewer Wall Street seats than it seems


By Antony Currie

(The author is a Breakingviews columnist.)

NEW YORK, March 6 ( Breakingviews) - Lyft's initial public offering has fewer Wall Street seats than it seems. The ride-hailing firm has booked a staggering 29 banks for its trip to the public market. Only three, though, will earn a decent fare, led by JPMorgan. That's an unusually small group for an IPO that could raise $2.5 billion or more.

Strictly speaking, consolidation and technology have rendered large syndicate groups unnecessary. But going public is a good time to reward firms for good ideas and past favors - or just to share some wealth. Lyft, for example, has four banks on its roster that don't show up on any U.S. IPOS of the past decade. And by handing them only small amounts of stock and fees, the risk is low.

There's no need for more than two or three lead banks, either - so-called joint bookrunners. But over the past five years, only one other company raising $1 billion or more in its U.S. market debut has appointed as few as Lyft: Chinese video-streaming service iQiyi, which sold $2.4 billion of stock last year. Snap gave the moniker to seven banks in its 2017 deal, while Axa Equitable totted up 15 last year.

That comes at a cost. The bank in the driver's seat of an IPO teeming with bookrunners usually gets at least a fifth of the fees. Goldman Sachs may have got as much as half from running iQiyi's deal, according to Refinitiv.

But the more bookrunners there are, the smaller the spoils are for the rest of them. Chinese electric-car maker Nio paid most of its seven other bookrunners a third of what Morgan Stanley earned. On Axa's deal last year, four banks pocketed less than 3 percent of the lead's pay - and less than co-manager Lazard did.

JPMorgan's cohorts on the Lyft IPO, Credit Suisse and Jefferies, will probably do better than that. If rival Uber sticks with recent market practice on its expected IPO, though, there will be more wannabe drivers clamoring for their share.

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- Lyft appointed JPMorgan to be the stabilization agent for its initial public offering, Bloomberg reported on March 4. This means that the bank, the lead underwriter on the deal, will be responsible for setting the price of the IPO as well as overseeing the distribution of any extra shares under the so-called greenshoe option. A total of 29 banks are working on Lyft's stock offering.

- The ride-hailing firm's IPO prospectus was published on March 1. Insiders hope the listing will value the company at between $20 billion and $25 billion, sources told . The last funding round valued the firm at $15 billion.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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