As expected, ‘s IPO will cost more than its initial target range of $62 to $68 per share. The ride-hailing company published a , detailing a new price range of $70 to $72 per share.

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The new range more establishes a higher minimum valuation for the Lyft IPO (from $62 to $70, a 13 percent change) than it does boost the top end of its valuation (from $68 to $72, a 6 percent change). But given Lyft’s recurring cash consumption, the ability to raise more capital is likely welcome regardless.1

Lyft enjoyed ample access to capital while a private company, . Its IPO could see the company add an extra $2.5 billion to that total in a single day. Lyft is expected to price this afternoon, and begin trading tomorrow morning. We’ll have more on its final price later tonight when it becomes known.

IPO Wave

Lyft is kicking off a run of IPOs by highly-valued private technology, and technology-powered companies. The popular ride-hailingÌýshop may be the first out of the gate, but business video chat service Zoom and social media giant Pinterest have also publicly filed and should quickly follow.

In addition to the three firms with public S-1s, there are a number of other unicorns looking to go public soon who have privately filed to go public. In the wings, then, are companies like and ; nearly , just notÌýquiteÌýyet.

Given Lyft’s pole position, the firm’s IPO is a tone-setting moment for the market as much as it is a money-raising gambit by the transportationÌýfirm. If Lyft storms ahead during early trading, other firms with similar high-growth, high-loss models could be heartened into accelerating their offerings or aiming at higher prices. (We’ve seen evidence of this drafting effect already.)

Of course, in reverse, if Lyft stumbles in its public market moment, it could cast a pall across the current unicorn migration heading West to East across the country towards the halls of Wall Street.

Multiples

The precise valuation of Lyft at $72 per share, the top of its new range, is tricky to calculate as it depends on how you count.

Employing only issued Class A and B shares gives Lyft a valuation of around $20.5 billion. But if you add in seven million shares of Class A stock that were available for exercise as of Dec. 31, 2018, the number goes up. And Lyft has nearly 32 million Class A shares promised through RSUs that hadn’t vested at the end of last year either. Add those in (as most of them will vest), and the valuation goes up even more.

This is why “north of $20 billion” and “up to $24.3 billion.” It depends on how you count.

We’ll use the higher number this morning, because why not, let’s have fun. At $24.3 billion, Lyft’s $2.16 billion in 2018 revenue provides the firm with a trailing revenue multiple of 11.25. Note that using trailing revenue metrics to calculate multiples makes things look worse (more aggressive, that is) than they really are; using Lyft’s Q4 2018 revenue to set a run rate (multiplying it by four to get a more accurate look at the size of Lyft’s business), Lyft is worth a more modest 9.1 times revenue.

That’s a software-level multiple for a company with non-software-like gross margins.

But let’s stop being scolds for a moment. The point of calculating Lyft’s Q4 2018-driven revenue multiple is to allow us to determine what Uber would be worth at the same multiple.

A refresher:

• Uber Q4 2018 revenue: $3.02 billion
• Uber run rate using Q4 2018 figure: $12.08 billion
• Uber’s implied valuation using Lyft’s upper-end IPO price range revenue multiple of 9.1: $109.9 billion.

ThatÌýlooks like a good number. But hold on. Lyft grew more than 100 percent in 2018. Uber Ìýduring the same time period. It is far from clear that Uber will be able to secure the same revenue multiple as its smaller, more quickly-growing rival.

Still, the Lyft IPO is sketching the picture of the sort of valuation that Uber has long wanted. More when it prices.

Illustration:

The world’s ride-hailing companies need more money.

The revolution that Uber kicked off and a host of startups around the world are racing to complete is a cash-hungry business. Happily for the founders in the space, the business of ride-hailing generates one thing that investors do covet, namely growth.

And that spells big investment dollars. and have raised billions apiece. and have raised billions apiece. and have raised billions apiece. And none of them, so far as I can tell, generate profit. Indeed, the collection of companies are neck-deep in losses, deficits that show few signs of drying up.

And that means that the group of companies needs more money. And they are out to get it. Lyft’s IPO is set to raise $2 billion, we recently learned. That’s a fraction of , but is still a staggering sum of money for a company whose competitive edge seems to be its brand.

And even more, recent news has Ola, the India-based ride-hailing leader, . You’ll forget about the Ola round by lunch. After all, it’s just another few hundred million into a regional ride-hailing shop. It’s not like it’s a big deal.

More notable than simply the titanic sums of capital that the ride-sharing world has raised is how far it remains from making money. The ever-excellent from the Lyft IPO roadshow:

Note that at some point in the future Lyft expects its “Adjusted EBITDA Margin” to reach 20 percent. That’s pretty slack, and the news gets even worse. Here’s :

I had to *really* squint to read the footnotes. “Adjusted” Ebitda excludes: depreciation and amortization, stock pay, charges to insurance reserves, acquisition related costs, income taxes and interest. Ok!

In short, Lyft will, at some point in the future yet to be determined, generate 20 percent profit margins on its revenue, provided that we exclude an incredible slurry of material, GAAP costs from the calculations. The only way I can read the chart’s figures and its explainer text is that Lyft expects to never make money, and it wants you to know it.

A 20 percent operating margin would be mildly ok. It’s certainly not software-like performance, but Lyft could be big, and thus the profit material. But if your fake profit metric that strips out real costs only gets you to a 20 percent clearÌýat some point, you aren’t going to have much profit at all, measured using normal metrics.

And this company wants $2 billion more? After it has already raised $4.9 billion?

Fracking

A huge industry that can raise untold billions, whose profits are always out in the future? Ride-hailing isn’t the only game around when it comes to those terms. There’s also fracking.

The Lyft situation reminds of a book I read last year, Ìý, which digs through the American oil boom. I dug up a passage that should sound somewhat familiar:

[Famous investor David] Einhorn’s firm looked at the financial statements of the sixteen largest publicly traded frackers, which included companies like Pioneer and EOG. Einhorn found that from 2006 to 2014, the fracking firms had spent $80 billion more than they had received from selling oil and gas. Even when oil was at $100 a barrel, none of them generated excess cash flow–in fact, in 2014 when oil was $100 for part of the year, the group burned through $20 billion.

Yep.

If the fracking world will ever actually generate enough return to make the capital it ingested sensible isn’t clear to me, and I don’t claim to know the answer (McLean’s notes on the fast decline in output from fracking wells seems to indicate that the answer is no). But the concept of a hugely popular investment into a field that is quite disruptive but may never actually make money is therefore not unique to any one industry.

Uber, of course, loses even more money than Lyft. Didi, Uber’s old China-based rival, . And offshoots of the ride-hailing boom, namely scooters and bikes, are suffering as well. But, probably, none of this is enough to slow the Lyft IPO.

And with $2 billion more (or $300 million more for Ola, or whatever Uber will raise in its own flotation later this year), Lyft can keep growing. Just to what end I don’t find entirely clear. And from the above Lyft slide, perhaps it doesn’t either.

Illustration: .