Why Warren Buffet did not buy Lyft IPO; legendary investor’s take on hot market issues

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April 07, 2019 1:46 PM

While Uber’s rival Lyft saw huge investors interest in its IPO and on the first day of hitting the market on 29 March, the stock lost its lustre over the week.

Warren Buffett joins crowd struggling to understand OracleLyft was reportedly valued at $24.3 billion, more than what it had sought, that is, $23 billion in its IPO.

While Uber’s rival Lyft saw huge investors interest in its IPO and on the first day of hitting the market on 29 March, the stock lost its lustre over the week. Lyft’s IPO was the first public issue in the global transportation technology space. Legendary investor and the ‘Oracle of Omaha’ Warren Buffett has suggested investors to stay away from it.

Lyft was reportedly valued at $24.3 billion, more than what it had sought, that is, $23 billion in its IPO. However, Warren Buffet, chairman and CEO of Berkshire Hathaway, said that he “certainly wouldn’t buy a business for $25 billion,” in an interview with CNBC.

Lyft’s public offer was oversubscribed as investors rushed to participate in the largest tech IPO since Snap in 2017. However, its share price went down by 12 per cent from its initial price of $72 before closing at $69.01, according to Reuters.

Warren Buffett, who hasn’t bought an IPO since 1955, stressed that the path to Lyft’s profitability is still unclear. “So I look at what I’m getting as a part owner of a business, and I don’t know why, with all the things you can buy for $25 billion in this world, that you would pick a business that really has to be earning $2.5 or $3 billion pre-tax in five years to even be on the same radar screen as things you can buy right now.” He had last purchased 100 shares of Ford in 1955.

While 2019 is expected to see more such IPOs by internet giants even as Uber and Pinterest are expected to go public in April, as per media reports, Warren Buffett dismissed subscribing to new offerings. “I think buying new offerings during hot periods in the market… I don’t think it’s anything that the average person should think about at all,” he told CNBC.

Warren Buffett, though, had missed many IPOs where he thinks he should have invested, that’s not what concerns him. “I worry much more about the things I do than the things I don’t do. I mean, I missed all kinds of opportunities in my life,” he said while cautioning investors to be sure of being “on the side of the house when you bet, rather than bet against the house.”

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