Uber and Lyft Are Giving Massive Discounts as They Race to Go Public
But will this make them more appealing to Wall Street investors? Maybe. Maybe not.
If you're an Uber or Lyft rider, you may have noticed that both companies have been offering discounts in recent weeks. As Uber and Lyft each plan an initial public offering (IPO), the companies are trying to bolster rider numbers in an effort to appear more attractive to investors, according to TechCrunch.
According to a report from The Information, Lyft recently extended discounts to one-third of its users' recent trips, a tactic that earned the company an additional four percent of the United States ride-hailing market. Lyft's share is now 34 percent, while Uber has 66 percent of the measured market, according to the report.
Uber is also increasing discounts in order to maintain its majority share of the market, according to TechCrunch. Discounts are a great way to attract more riders, but they also mean the company makes less money off each ride. That doesn't seem like the best thing during the push toward an IPO when companies are normally focused on showing the healthy profits investors crave. The drive to increase ridership may just be a manifestation of typical Silicon Valley competitiveness.
Lyft was the first company to file for an IPO, doing so in December 2018. Uber quickly followed with its own filing. Lyft is also expected to launch its IPO first, sometime later this year. Uber is expected to follow shortly after. While it is a much larger company, Uber has been hamstrung by numerous scandals and has found profits elusive. Both companies also face increasing criticism from regulators over issues such as traffic congestion and driver wages.
Both IPOs will be a referendum on ride-hailing and other businesses within the so-called "Gig Economy." These businesses rely on freelancers, allowing companies to shed the costs associated with large numbers of employees. But going public will test Wall Street's long-term appetite for these types of companies.