EquityZen in Bloomberg

One Theory Why Lyft, Uber IPOs Flopped: Special Purpose Vehicles

  • SPV investors are locked up and looking for ways to hedge
  • That’s fueled high levels of short selling, especially in Lyft

The dismal debuts of Lyft Inc. and Uber Technologies Inc. sparked hand-wringing and a search for scapegoats. One theory gaining ground centers on the high number of special purpose vehicles that invested in the twin ride-hailing giants when they were private companies.

SPVs are often set up to invest in fast-growing startups, especially those like Uber that stay private for many years. Many employees with equity want an exit and won’t wait for an initial public offering, so those vehicles are formed to buy their stock.

Uber’s IPO flop suggests investors are growing wary of the business prospects in ride-hailing, but the proliferation of such structures may have precipitated a market selloff. There are at least 100 Uber SPVs, according to Atish Davda, chief executive officer of EquityZen Inc., a firm that handles private market transactions. He doesn’t know how many there are for Lyft. But a regulatory filing by the U.S. company in June listed seven SPVs among about 75 total backers.

Read more here: https://www.bloomberg.com/news/articles/2019-05-17/one-theory-why-lyft-uber-ipos-flopped-special-purpose-vehicles

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