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One of Wall Street’s most prominent short sellers has a word to the wise: Don’t bet against Lyft.
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Andrew Left of Citron Research — famous for shorting Tesla and Valeant Pharmaceuticals — called betting against the ride-hailing company an “amateur trade.”
“Shorting disruptive companies that dominate a megatrend simply because they lose money is a sure way to go broke,” Left wrote in a note to clients Friday.
Lyft, much like its larger rival Uber, is losing money. Lyft lost $911 million despite $2.1 billion in revenue last year, according to a regulatory filing. During its initial public offering roadshow, the company promised eventual 20 percent EBITDA margins but provided no timeline for that.
The San Francisco-based company made its public debut on the Nasdaq last Thursday. Lyft surged 9 percent in its highly anticipated IPO, but stumbled 12 percent by the second trading day. On Friday, it rallied 5 percent and traded back above its IPO price of $72.
Citron is long on Lyft, citing high growth despite losses.
The company grew its active ridership by more than five times from the first quarter of 2016 to the end of last year, according to a regulatory filing. It also has plenty of room to run based on some projections of its total addressable market.
Left pointed to a Goldman Sachs estimate that the ride hailing industry is expected to grow to $285 billion by 2030. It’s also a discount compared to Uber, which plans to go public in the coming months. At a reported $120 billion valuation, Uber is valued six times higher than Lyft, Left said.
“The entire ride share market in the US only accounts for 1% of miles traveled today…. we have only just begun,” Left said. “This is not a trendy video game or a GoPro camera…. this is a way of life that is saving people time and ensuring safety. Ridesharing is not a fad… it is a megatrend.”
Some hedge funds are less convinced.
According to IHS Markit, short sellers have borrowed6.61 million shares of Lyft, or $455 million worth. It’s expensive to bet against Lyft. The cost to borrow the ride-hailing shares rose to more than 100 percent a day, making it the most expensive U.S. company with more than $5 million in balances to bet against, according to IHS Markit.
— CNBC’s
Yun Li
contributed reporting.