According to the New York Times, Lyft is looking for a buyer. The San Francisco-based company approached tech giants like Apple, Google, Amazon, and General Motors. An independent Bloomberg report indicated the company was looking for a $9 billion offer.
Lyft is currently the second largest transportation network company in the United States. Competitors like Uber and Didi Chuxing wouldn’t bid more than $2 billion, added Bloomberg’s report.
Lyft is not the first project by Logan Green and John Zimmer. Back in 2007, they created a program called Zimride. It was a long-distance car-pooling program. Lyft founders wanted to create a new ride-share service to reduce the congestion on roads. The idea became global, and it opened the door for companies such as Grab in Southeast Asia, BlaBlaCar in Europe, Ola in India, Uber, and Lyft itself.
For $9 billion, Lyft is not precisely a sweet deal
Lyft partnered with Qatalyst back in June to find a buyer. Qatalyst is an investment bank founded by the Silicon Valley banker Frank Quattrone. The bank specializes in business acquisitions and mergers.
Lyft has failed to find a buyer mainly due to its cost. Lyft was valued at $5.5 billion in January after a $500 million investment by General Motors.
G.M. helped Lyft by setting up a series of short-term car rental businesses across the United States, where people who do not own cars can pick up a vehicle and drive for Lyft to earn money.
The ride-hailing is also struggling to find a buyer due to the complicated business model. Lyft’s drivers are anticipated to make $2 billion in this year. Lyft only takes about 20 or 25 percent of the cost of each ride, so the company is expected to earn about $400 million. That revenue then shrinks after the company pays its drivers additional loyalty expenses to keep them from joining another company.
Lyft, Uber, and other ride-hailing companies are about to take a big hit in the US
Newer regulations have additionally discouraged buyers. Massachusetts is preparing a new law to impose a 5-cent fee per trip on ride-hailing apps such as Uber and Lyft. The money will be spent on the traditional taxi industry.
Massachusetts Governor Charlie Baker signed the law as part of a pack of regulations. The fee is expected to raise millions of dollars a year as Lyft and Uber combined have 2.5 million rides per month in Massachusetts.
Currently, Lyft is facing uncertain times. Uber is closer to become fully autonomous after its partnership with Volvo led to the creation of 100 Volvo SUVs with self-driving features. The SUV’s will soon operate in Pittsburgh.
Source: New York Times