When tech companies reach public markets, the countdown starts for founder exits. Years of battling regulators, wheedling investors and wooing customers take their toll. John Zimmer and Logan Green, co-founders of San Francisco ride-hailing company Lyft, are the latest to step aside.
Unfortunately for new chief executive David Risher, the changeover is not taking place at a high point. Lyft shares trade 87 per cent below their 2019 listing price. New ideas are needed. Risher is a former Amazon executive who runs a non-profit digital library. But his role as a Lyft board member over the past two years suggests he has been hired for continuity.
The founders will maintain some control too. Dual-class stock provides them with almost a third of voting rights. Shareholders, remembering Lyft’s performance, should agitate for equal voting rights in future initial public offerings.
Lyft’s basic model remains unproven. Like Uber, it acts as a middleman between drivers and customers. It keeps costs low to secure both constituencies — to the detriment of profitability.
Lyft avoided global expansion and food delivery. That makes it dependent on the US, a market Uber dominates. Lack of customer loyalty means it continues to lose market share. While Uber reported positive cash flow last year, Lyft was burning through money.
Rider numbers were flat in the last quarter. Lower prices are required to boost that total, meaning revenue growth will drop. To keep a steady supply of drivers, Lyft cannot increase its share of gross booking charges either. Operating losses doubled to $596mn in the last quarter. Even with cost cuts, there is no hope Lyft can reverse this trend.
Tech companies run by career administrators experience mixed fortunes. Microsoft’s Satya Nadella has prioritised subscription products to great effect. So has Apple’s Tim Cook. Risher lacks their experience.
He may not have long to make his mark either. Lyft’s poor market performance and high costs make it a potential acquisition target. A buyer would likely install their own driver behind the wheel.
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