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)

Lyft founder John Zimmer

Bankers will compare Lyft to "marketplace" companies, such as the food-delivery service Grubhub and the 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, such as Netflix, as well as "platform" companies, such as Square and Facebook.
The companies Lyft gets compared to by investors could have a big influence on the company's price during its IPO. 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, such as 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 that connect sellers of a good or service to customers.

In addition to Grubhub and Farfetch, sources said bankers on the deal will compare Lyft to other marketplaces, including the creative goods site Etsy, the freelancing platform Upwork, the online travel operator Booking Holdings, and the 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, the payments company Square, and the e-commerce platform Shopify. Others are looking to compare the company to other high-growth internet firms, such as Netflix and Argentina's e-commerce site MercadoLibre, the people said.

The types of companies that investors choose to value Lyft against is very influential because 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-earnings (P/E) ratio of 6.87, while Ford has a P/E ratio of 9.31.

Meanwhile Grubhub has a P/E ratio of 90.31.

In the case of Lyft, price-earnings ratios are less relevant because the firm loses money. Lyft registered a nearly $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 about 6 times its estimated 2019 revenue of $3.3 billion.

While that's higher than the comparable ratio for companies such as 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 26.7 times sales, while Twitter went public at 13 times its sales.

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

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