Maltese special forces have seized a Turkish oil tanker, El Hibu 1, which had been hijacked by the very migrants it stopped to rescue in the Mediterranean Sea off the coast of Libya.
The El Hiblu 1
Five of the migrants have been arrested, and are accused of overpowering the vessel’s 12-man crew – forcing the oil tanker’s captain to cede control “through coercive action,” according to the Telegraph, citing Maltese government sources.
77 of the 108 migrants – or 71% – were men, who were traveling with 19 women and 12 children.
“The captain repeatedly stated that he was not in control of the vessel and that he and his crew were being forced and threatened by a number of migrants to proceed to Malta.”
The tanker was prevented from entering Maltese waters by a Maltese patrol vessel, after which a special forces unit was dispatched to board the tanker and regain control. The operation was backed up by a patrol vessel, a helicopter and two fast interceptor craft.
“The tanker, her crew and all migrants are being escorted by the Armed Forces of Malta to Boiler Wharf (in Valletta) to be handed over to the police for further investigations,” said Maltese authorities.
Police buses await migrants who arrived on the hijacked merchant ship CREDIT: DARRIN ZAMMIT LUPI/REUTERS
Italian interior minister Matteo Salvini called the migrants “pirates” – calling the hijacking “the first act of piracy on the high seas with migrants.”
“They are not shipwrecked migrants but pirates. They should know that they will only see Italy with a telescope,” said Salvini, adding “I tell the pirates, forget Italy.”
Italian Interior Minister Matteo Salvini
Armed military personnel could be seen onboard the tanker when it arrived in Malta’s capital of Valletta on Thursday morning, reports Sky, while the Telegraph adds that the troops had established communications with the captain while the ship was approximately six nautical miles offshore.
Human rights groups have defended the hijacking, saying that the refugees were simply trying to escape the “hell” of detention camps in Libya.
Refugees and migrants say they are beaten, raped and even sold as slaves in Libya.
They are tortured by smuggling gangs in order to extort more money from their families back home.
“No state can expel or push back refugees to countries in which their lives and liberty would be under threat,” said Mediterranea Saving Lives, a humanitarian NGO.
Sending the migrants back to Libya would constitute “not just a crime but an act of inhumanity.
“The ship should be immediately assigned a safe port in a European country where these people’s human rights will be guaranteed.
“They should not be treated like ‘pirates’ or criminals, but as asylum seekers who are fleeing the hell of detention camps in Libya,” the NGO said. –Telegraph
As the Telegraph notes, the hijacking coincides with an EU decision to effectively scrap a 2015 joint naval agreement, Operation Sophia, which was tasked with reducing human trafficking and intercepting migrant boats and dinghies migrants in the Mediterranean.
Air patrols over the Mediterranean, meanwhile, will be maintained over the next six months – while there will be no rescue ships. Approximately 2,300 migrants and refugees died in 2018 while trying to cross into Europe, according to UN figures.
via ZeroHedge News https://ift.tt/2FGvlUl Tyler Durden
The Economist recently profiled the well-known conservative pundit Ben Shapiro. The article itself was inoffensive, but the headline initially described Shapiro as “the alt-right sage without the rage.”
That is simply wrong, and it betrays The Economist‘s unfamiliarity with what the term “alt-right” means. No, Shapiro is not part of it. In fact, Shapiro has been a target of online harassment from some of the alt-right’s members.
Shapiro was understandably displeased about being casually lumped in with the tiki-torch marchers of Charlottesville. “If you lump me in with people who are so evil I literally hire security to walk me to shul on Shabbat, you can go straight to hell,” he tweeted.
Thankfully, The Economist realized its error and quickly changed the headline. Shapiro is now called a “radical conservative,” which is more defensible, in that it’s not flat-out wrong.
My guess is that The Economist has no idea what the alt-right is and just wanted a headline that rhymed. Perhaps its editors presumed the term just refers to someone who is even more on the right than your standard conservative. But the alt-right is a very specific ideological group that is not really more or less conservative. Its members subscribe to an ideology that they believe should replace the mainstream right.
My forthcoming book, Panic Attack: Young Radicals in the Age of Trump (pre-order here), includes an entire chapter on the alt-right. I covered some of their rallies and interviewed prominent members, including their best-known leader, Richard Spencer. In brief, the alt-right is a white nationalist movement that promotes an identitarian worldview: They think a person’s worth is determined by his membership in a race-based group. The alt-right wants the U.S. to be a place for white Europeans and their descendants, and for the government to promote and protect the interests of white Europeans and their descendants. This is not a movement for black people, Hispanic immigrants, or Jews—all of whom represent a kind of “other” from the standpoint of the alt-right.
Needless to say, these are ugly and overtly racist beliefs. They are also at odds with what Shapiro, as a Jewish man, represents.
They are also at odds with what Shapiro thinks. To take just one example, Shapiro-style conservatives constantly bemoan identity politics. But the alt-right is all about identity; Spencer is actually in favor of identity politics. As he told me when I interviewed him, “I think actually the left is getting at something real when they say, ‘I am not just an American citizen. I’m not just an individual consumer or producer in capitalism.'” He then accused conservatives and libertarians of “running away” from the sense of belonging that identity politics can provide, as part of our misguided defenses of individualism and markets.
If you’re confused or intrigued by this, you should pre-order my book and read the full chapter. The alt-right really is its own thing, and casually lumping Shapiro in with it was a lazy move that The Economist was right to correct.
Intransigent Brexiteers have managed to convince Jacob Rees-Mogg and Boris Johnson to walk back their support for May’s withdrawal agreement, and the DUP – the 10 Irish Unionist MPs who shore up the Tories majority in Parliament – has declared that it will once again oppose the deal, and insists that it has broken off talks with the government (though May’s side insists negotiations are ongoing). Yet, May has apparently managed to find a way to meet Speaker John Bercow’s “substantially different” test and is now hoping to bring her wildly unpopular withdrawal agreement back for a third meaningful vote on Friday.
To satisfy Bercow’s ruling, May has separated the withdrawal agreement from a nonbinding political declaration setting out the terms for the next stage of negotiations.
The pound slid to its LoD on reports that the government was laying down a motion to call for a Friday evening vote, erasing all of its gains from earlier in the week.
If the deal fails, May’s government has intimated that MPs will risk a longer delay of Brexit or possibly parliamentary elections which could hand control of the Commons to Labour. Of course, a longer delay would be contingent on the EU’s approval, so it’s probably equally likely that the UK would leave without a deal on April 12.
via ZeroHedge News https://ift.tt/2YyBY2s Tyler Durden
In a mirror image of yesterday’s mediocre, tailing 5Y auction, moments ago the US Treasury sold $32 billion in 7 Year paper in a stellar auction, stopping at a yield of 2.281%, a big drop from February’s 2.538% and the lowest since November 2017, stopping through the When Issued 2.290% by 0.9bps. The bid to cover came in at 2.544, just below last month’s 2.598, if above the six auction average.
The internals were more remarkable, with Indirects taking down 64.5%, 9% higher than the February Indirects bid, and the highest since November; it was also well above the 6 auction average of 60.7%. And while Directs could not match their February enthusiasm, with the takedown dropping to 20.7% from 28.4%, Dealers also ended up holding less of the auction, or just 14.79%, the lowest since January 2018 as there was no stopping the bid side demand.
via ZeroHedge News https://ift.tt/2TFzmw8 Tyler Durden
Secretary of Education Betsy DeVos, arguably the most consistently dragged member of President Trump’s cabinet, has stepped in it again, this time with a budget plan that calls for zeroing out $17.6 million in funding for the Special Olympics, which organizes athletic training and competitions for intellectually disabled children and adults.
That reduction comes in the context of an Education budget that asks for 10 percent less than what it was given in fiscal 2019, a rare moment of parsimony for a government that has amassed $22 trillion in debt and set a record in February for posting the single-biggest monthly deficit in history. DeVos’s budget for 2020 requests $64 billion, down from about $71 billion this year.
Needless to say, DeVos is being roasted like a chestnut on an open fire, as if she were cutting educational resources for intellectually disabled students (in fact, the budget allocates over $32 billion for “high-need students,” which includes intellectually disabled students). Rep. Joseph Kennedy III (D–Mass.) called DeVos’s plan “cruel,” “misguided,” and “outrageous.”
Kennedy was joined in his sentiments by Sen. Roy Blunt, a Republican from Missouri, who insisted that no cuts would ever be made to the Special Olympics while he’s on the Appropriations Subcommittee:
NEW: In stmt, Sen @RoyBlunt, who chairs the Approps Subcmte which sets funding levels for Dept of Education, says of cuts to Special Olympics in Trump budget: “Our Department of Education appropriations bill will not cut funding for the program.” pic.twitter.com/MIXHyUchPk
The relevant question, of course, isn’t whether the Special Olympics does good work. It’s whether it should be funded by the federal government. The short answer is no, as this sort of activity, however uplifting, is not a core function of government. Indeed, even if the federal government were flush with cash, it shouldn’t fund the Special Olympics—or many other things it currently funds. President Trump has put together a budget that asks for a record-high $4.75 trillion, so I can understand why Special Olympics advocates feel like their relatively small slice of the pie is being unfairly targeted. But the plain truth is that government cannot and should not pay for everything that somebody wants. Our leaders need to be bringing year-over-year cuts to every aspect of the federal government the way that DeVos is doing at Education. As DeVos wrote in response to her critics:
There are dozens of worthy nonprofits that support students and adults with disabilities that don’t get a dime of federal grant money. But given our current budget realities, the federal government cannot fund every worthy program, particularly ones that enjoy robust support from private donations.
This isn’t the first year that DeVos called for cuts to the Special Olympics and there is very little reason to believe the reductions will go through. But even if they did, the organization and its beneficiaries would still be in excellent shape. Founded in 1968 by Eunice Kennedy Shriver, the Special Olympics is a 501(c)3 nonprofit, meaning that deductions to it are tax deductible. According to its 2017 financials (the most-recent available on the web), the organization had total revenues of about $149 million, including $15.5 million in federal grants. It’s not a stretch to assume that if federal funding disappears, the resulting outcry would lead to record donations.
This sort of flap is political theater at its most transparent and unhelpful by diverting attention from more important topics. There are serious questions to be asking about the size, scope, and spending of the federal Department of Education and whether it should even exist. It was established in 1979, and Ronald Reagan campaigned on a promise to kill it if he took the White House. Not only didn’t he kill it, he expanded its budget throughout his presidency. Yet student achievement, the most-basic measure of educational productivity, has not improved since the department was created and began effectively controlling more and more aspects of the K-12 curriculum.
The potential of ride-hailing platforms like Lyft, Uber, and Didi cannot be denied. Lyft, in particular, is attempting to set a stock market milestone by being the first ride-hailing company to go public. Until Uber hits the market in a month or two Lyft will also be the largest publicly traded stock in the “gig” economy. The investor reception and valuation the Lyft IPO receives will set the tone for all the ride-hailing competitors who follow.
This one of a kind guide ahead of Lyft’s IPO answers all of your most pressing questions:
How does the ride-hailing business model work?
Can Lyft make money outside of ride-hailing?
Is Lyft holding its own against Uber?
What do drivers think of Lyft?
When will self-driving cars arrive?
When will the company break even?
Will Lyft run out of money if they don’t turn a profit soon?
Who owns the shares and is there a lockup?
Should I buy the stock on the Lyft IPO date?
and much more…
LYFT ON THE BLEEDING EDGE OF SHIFT TOWARDS TRANSPORTATION AS A SERVICE (TAAS)
In the past there was a tangible value associated with ownership of a car. Owning your own car meant freedom to travel when and where you wanted. Car ownership was a status symbol and a statement of individual style based on the make or model of the car. But then came the sharing economy. Society is starting to get used to sharing assets like cars with others for the sake of convenience and reduced upfront costs. Why pay a down payment and regular monthly payments to own a car that will be parked 95% of the time?
Along came ride sharing. The 21st century equivalent of carpooling, with a twist. Forget coordinating with friends and co-workers to arrange a ride or figuring out parking or paying for gas; there’s an app for that!
Companies like Lyft and Uber in North America and Didi, Ola, and Grab in Asia got in on the ground floor of ridesharing and created a new category for transportation, transportation as a service (TaaS).
The endgame for TaaS operators like Lyft, is a complete rethink of how people move from A to B. The addressable market is equivalent to the entire transportation expenditure for a household. In the United States alone that market is over $1.2 trillion.
The shift towards TaaS has the potential to disrupt huge long-established markets like automotive manufacturing, public transit, and even real estate.
LYFT’S TECH & IP – TECH COMPANY OR MARKETING PLATFORM?
Enabled by the digital revolution, consumers in the modern world expect everything on-demand. Ride sharing companies provide their customers with the instant gratification of knowing the moment you click that button in the app, a car will be on its way to take you wherever you need to go.
Matching rider to driver is at the heart of Lyft’s technology. Figuring out how to get a person from A to B is easy, however, ensuring that there is a driver who can reach a person quickly enough to satisfy those on-demand expectations and get them to where they need to go for a reasonable cost is more complicated.
You need a critical mass of drivers in a particular area and incentives for both the riders and drivers to use your platform. That’s why Lyft spends more than twice as much on Sales and Marketing as it does on Research and Development to retain drivers and riders on the platform (37% compared to 14% of revenues in 2018). Not what you’d expect to see from an emerging ‘tech company’.
The focus of Lyft’s technology is in utilizing the massive amounts of data they are gathering from the over 1 billion rides they’ve facilitated thus far. That means finding ways to optimize pricing for both riders and drivers to improve user retention and revenue per ride.
Convenience is one of the main draws for riders using Lyft so the company also needs to leverage its treasure trove of data to predict rider destinations, position drivers to maximize efficiency and balance out supply and demand.
The last area of technology-driven focus at Lyft is the prize at the end of the Transportation as a Service rainbow, autonomous vehicles (i.e. driverless cars) — more on this later.
LEADING UP TO THE LYFT IPO: AN OPERATIONAL HISTORY
Lyft is seeing rapid growth in riders and drivers. The company boasted 31 million riders in 2018, up from only 12 million in 2016. The company facilitated 620 million rides in 2018, up 65% from the year before and up from 160 million rides in 2016. Total rides are growing even faster than riders as the company is seeing a multiplier effect from existing riders choosing to book more rides than they did the year before. For example, ridership was up 35% in 2018, but the number and total value of rides increased by 65% and 75% respectively.
Lyft has also been very successful at taking a larger and larger slice of the fare charged to the rider. In 2016 Lyft took only 18% and gave 82% to the driver. By 2018 Lyft was taking 27%, leaving 73% for the driver.
On top of a higher cut of the ride, Lyft has drastically decreased driver incentives, which we think was largely due to public missteps by Uber. Uber antagonized drivers and local governments in 2017, allowing Lyft to convert both drivers and passengers to its platform. We think the strong demand among drivers allowed Lyft to cut driver promotions significantly.
Lyft spent $2.60 per ride on sales and promotions in 2016 but brought that number all the way down to $1.30 per ride by 2018. With Uber refocusing on winning back the hearts and minds of the public and drivers we wonder if this is the bottom for incentives and the end of Lyft’s ability to continue squeezing drivers.
ADDITIONAL REVENUE STREAMS WILL APPEAR
The current economics of ride-hailing do not look particularly attractive judging by the losses both Lyft and Uber are still generating. However, Lyft’s focused and simplified business model will not be the same five years from now. Below is just a sample of potential new revenue sources Lyft can exploit as its platform grows and adapts.
Sell rider data
Facebook and Google have shown that user data has value. Lyft captures millions of data points on rider behaviour, locations, and travel patterns every minute and there will be opportunities for the company to sell access to this information.
Sell advertising and entertainment on mobile and in-car screens
If the Lyft app eventually becomes a resource for riders both before and during a trip, there is an opportunity to sell advertising space within the app to generate additional revenue. The arrival of autonomous vehicles would open up a huge marketing opportunity.
Replace underutilized public transit with ride-hailing
Uber is already doing this with pilot programs in Canada and smaller cities in America. Small towns with limited demand for public transportation can cut down on their operating costs by subsidizing car rides for citizens instead of paying for expensive buses to ferry people around. A pilot program in Innisfil, Ontario, is costing the town $250,000 a year, saving them $750,000 vs owning and running their own public bus service. The revenue opportunity from replacing underutilized mass transit in smaller towns and cities is a significant opportunity longer term.
Self-driving Fleet
The transition away from human drivers is already underway. New cars today come with autonomous features like lane assist, collision detection, and so on. Being able to provide rides to customers without a human driver would remove a significant cost driver (yes, the pun is intended) for Lyft which explains why management is investing heavily in partnerships and research towards fully autonomous vehicles.
While autonomous vehicles are potentially the key to unlocking profitability in Lyft’s business, they will also present several challenges for the company. First, of course, are the technological challenges of ensuring these robot cars will perform as well as human drivers, which some predict may not happen until 2035. Then there will be the inevitable patchwork of different regulations and policies on how to treat driverless vehicles in different jurisdictions where Lyft operates, akin to the many battles the company already faced operating under municipal taxi and livery regulations.
On an even higher level there are bigger uncertainties on the path towards autonomous driving. How many people will want their own private autonomous vehicles vs those who merely rent time on a fleet? Will auto manufacturers start their own TaaS offering and will public transit be able to modernize to stay competitive?
There are also external costs to the environment and society. Even though it’s likely that autonomous vehicles of the future will be electric-powered there is still a potential environmental impact as studies have pointed out that AVs could increase the number of Vehicle Miles Travelled (VMT) due to empty vehicles traveling between pickups. Not to mention the potential societal impact on city planning, traffic, and access to transportation for those with low incomes or disabilities.
There are many ‘IFs’ that need to be answered before Lyft moves decisively into an autonomous driving future. However, in the long run, Lyft needs to incorporate Autonomous Vehicles if it wants to reach the true profit potential it touts to investors.
Autonomous vehicles from a profit perspective really are the holy grail for any ride-hailing company. Self-driving cars will eventually make human drivers obsolete, giving Lyft 100% of every fare instead of paying out 70%-80% to drivers. The potential of a dramatic increase in profitability is what justifies annual R&D expenses in the hundreds of millions for both Lyft and Uber.
Self-driving cars are still at least a decade away according to some industry estimates, forcing these companies to turn a profit while still earning only $0.20-$0.30 cents for each dollar of travel booked through the app.
Affiliate fees for connecting riders to other transportation providers
Both Uber and Lyft are investing in the nascent e-scooter and e-bike businesses and are offering ways of connecting a ride-hail to a scooter or bike ride, thereby up-selling their customers on another service. But beyond scooters and bikes, Uber has already begun testing additional in-app content to help users plan trips through other transportation providers.
In Denver, a user can look up public train and bus times in the Uber app though they can’t yet book travel without going outside the app. Over time ride-hailing companies may allow users to book additional transportation options on buses, trains, or public transit, earning a cut of this additional ticket value.
GROWTH IS STRONG BUT ECONOMICS LEAVE MUCH TO BE DESIRED
On the one hand this is a company seeing rapid adoption and a growing take of the total ride value, but on the other hand, losses are mounting. Lyft lost $1 billion in 2018, up from a loss of $700 million the year before. Lyft is choosing to go public when the size of the losses are still growing, making it very hard for investors to forecast how management will turn these losses around.
Putting the losses in perspective, for every $13 ride Lyft facilitated, it lost $1.60 in 2018. This is an improvement from losing $4.30 per ride in 2016, but still a long way from profitability prior to the Lyft IPO.
What is most concerning to us is the lack of data showing that economies of scale are kicking in as the company grows. For example, the company increased its take of the value of a ride by 9% over the last two years while the gross margin, which is revenue minus direct costs, increased only 8%. This tells us the direct costs of running the app did not scale at all over a period when the company tripled the rides it gave.
With its current cost structure, Lyft needs to facilitate 1.6 billion rides annually to break even. Given the company handled 600 million rides in 2018 and is growing at 70% a year. We estimate Lyft would break even by late 2021, but only if fixed costs do not increase in coming years. 2021 matches up with the profitability timeline being given out by management to big bank analysts.
Keep in mind that reaching profitability in 2021 assumes corporate costs stay flat going forward which is an unrealistic assumption. After the Lyft IPO as the company grows it will have to staff up call centres, hire new corporate employees and spend more on advertising and R&D, which will all contribute to rising costs. Without a drastic decrease in corporate costs (currently $3.00 per ride), Lyft is going to have trouble turning a profit anytime soon.
Based on a few different sensitivities we have run (explained below), the company will struggle to break even before 2026.
Base Case: 20% cut of revenue
Lyft’s cut of revenue falls to 20% from 29% over 5 years.
No self-driving.
Ride growth falls from 11% to 5%, falling by 2% a year.
Operating costs per ride fall at a similar run rate to 2016-2018.
Scenario 1: 26% cut of revenue
Lyft’s cut of revenue falls to 26% from 29% over 5 years.
No self-driving.
Ride growth falls from 11% to 5%, falling by 2% a year.
Operating costs per ride fall at a similar run rate to 2016-2018.
Scenario 2: Faster Growth
Same as scenario 1, except rider growth is maintained at the 2018 level of 11% per year.
Scenario 3: Self Driving
Drivers are phased out over a 5-year period beginning in 2025.
Lyft purchases and maintains its own fleet of autonomous vehicles.
Vehicle capital and operating costs are added into overall costs.
THE CUT UBER AND LYFT TAKE HAS BEEN RISING, BUT CITIES AND DRIVERS ARE FIGHTING BACK
Over the past three years, Lyft has been very successful in increasing its share of the value of a ride by cutting driver incentives and increasing fees drivers have to pay. Revenue is up six times as a result. However, we think there are real risks that may start driving Lyft’s cut back down again.
The economics of driving full time for ride-hailing services are marginal at best with some sources estimating that half of drivers make less than $10 an hour. If Lyft pushes driver earnings down too far they may start to run into driver retention problems, which are already an issue. Just this week, thousands of drivers are striking in Los Angeles to protest recent cuts to their per mile pay.
A more immediate risk to Lyft may be local governments – they are beginning to lobby for higher wages on behalf of the drivers who are also tax-paying citizens. New York City, for example, enacted the country’s first minimum wage for ride-hailing drivers. Average driver pay went up 50% which all came out of the ride-hailing company’s pockets. There is a real risk that increasing competition, regulatory change, and driver pushback reverse recent successes Lyft has made in increasing its share of each ride.
UBER IS THE ELEPHANT IN THE ROOM
Any investor conversation has to include Uber, Lyft’s main competitor and the clear market leader in North America. The ride-hailing ecosystem in America is defined by these two companies and though Lyft has been gaining market share, Uber still generated the vast majority of on-demand rides in North America.
In 2017 Lyft was the primary beneficiary of a series of public missteps by Uber management. Uber antagonized local governments and drivers, enabling Lyft to stand out as the kinder alternative with more earnings potential for drivers. Lyft is estimated to have grown its share of the market to 30% in 2018, from less than 15% in 2016, all at the expense of Uber.
Since 2017 Uber replaced its CEO and has gone on a charm offensive to win back the trust of drivers by adding a tipping feature to the app and adding 24/7 customer service which did not exist before. The company also did away with certain promotional events that effectively increased the per hour pay of drivers on the platform.
Uber’s renewed focus on fixing its public image and winning back the trust of drivers looks to have slowed the market share loss to Lyft in 2018 and a continued refocusing by Uber back on the U.S. market may start to put pressure on Lyft’s growth and ability to attract drivers without large upfront incentives.
Uber remains immensely popular in America, consistently ranking as the #1 travel app download in the Apple app store and ranking in the top 20 most popular downloads nationwide. Lyft is #2 in travel but ranks as only the 50th most popular app on the platform.
LYFT VS UBER FROM THE DRIVER’S PERSPECTIVE
Employees are the lifeblood of any business and Lyft and Uber are no exception. Though ride-hailing companies classify drivers as independent contractors, not employees, the drivers are the workforce that keep these companies humming. Keeping the drivers happy is integral to low driver turnover and providing customers with a pleasant ride and fast pickup times.
A recent 1,200 driver survey by TheRideShareGuy.com helps us understand if there is brand loyalty among drivers and how drivers think of Lyft vs Uber.
Uber is the most preferred driving service by far
60% of drivers say they mostly drive for Uber compared to only 17% for Lyft.
80% of drivers have signed up for 2 or more on-demand apps including Lyft and Uber. With the proliferation of programs that scan both Uber and Lyft and choose the best fare automatically, driver loyalty is likely decreasing, not increasing.
Even though Lyft is the most liked, the value of fares determines who a driver works for
55% of drivers said pay was the most important part of driving for Uber or Lyft. The second most important was flexibility, which both companies provide equally. At the end of the day a driver is going to go with whichever service offers the highest earnings opportunity as long as there is not a massive difference in customer service levels.
Lyft and Uber are not the only ride-hailing companies out there. Looking at global competitors from Asia we can see that the profitability of a passenger and the way the company is valued in its home market vary widely.
For example, Ola in India makes only $2.00 per rider annually compared to Uber which makes $113. The market has adjusted for this, valuing Uber at $720 per rider compared to Ola at only $34 per rider. Overall, U.S. ride-sharing companies were priced at 6x sales during their last fundraising round, below faster-growing Asian peers but higher than Didi in China due to lower growth expectations in the near term for that market.
Using comparable company “price to billings” and “price to revenues” Lyft should have priced between $15 and $23 billion ($42-$65/sh). The Lyft IPO looks like it will debut with a market cap of $23-$25 billion which is in line with the valuation of Uber at the whispered IPO size of $120 billion, but far above valuations implied by recent funding rounds of global ride-hailing companies. The Lyft IPO is going to set a new high water mark for ride share company valuations.
CAPITAL STRUCTURE
Lyft has a relatively straightforward capital structure. Class A shares are common shares with 1 vote each while Class B shares are a special class created just so the founders Logan Green and John Zimmer can retain more control over the company. Class B shares have 20 votes each and control about 48% of voting power in the company. Lyft founders and employees own a majority of the company and are firmly in voting control meaning common shareholders will have little say in company decisions. This split voting structure is becoming more and more common and unfortunately is par for the course if you want to own a piece of a high growth company in demand with investors.
Looking at share ownership, not voting structure, the two founders and directors own 7% of the shares while employees and institutional investors with smaller stakes own another 48%. Large backers like Alphabet, GM, Rakuten, and private equity firm Andreesen Horowitz own another 33%.
SHARE LOCKUPS
Most of the shares owned by insiders are locked up for 180 days from the date of the prospectus filing. Insiders can start to sell their shares on the 181st day after the filing which falls on Sept. 2, 2019, however, if the date the lockup ends falls on a blackout period just prior to earnings, the lockup will end 10 trading days prior to the blackout period. Sept. 2 is not close to an earnings reporting period so we expect Sept. 2 will be the ultimate lockup expiration date.
Looking at Google, Facebook, and many other stocks, lockup expiration often puts downward pressure on share prices for a week or two. Solid companies with high growth and good fundamentals easily grow through this weakness, but for traders, lockup expiration dates are important milestones to track.
According to the prospectus for the Lyft IPO, it has 14 million options outstanding and another 46 million restricted share units (RSU) given to employees.
LOTS OF UNCERTAINTY AROUND HOW LONG THE CASH FROM LYFT’S IPO WILL LAST
If Lyft goes public at $70/sh, in the middle of the new higher offering range, the Lyft IPO will net the company $2.4 billion after all listing fees are paid. Adding the current balance of cash and liquid investments and subtracting the taxes due of $404.8 million from the IPO, Lyft will have $4 billion to work with.
Looking at the cash burn, the company spent $280 million on operations and another $330 million on equipment and buying other companies in 2018 for a total burn of $600 million. If the burn rate continues at this pace the company would run out of money in four years (2022).
However, breaking apart working capital we see significant positive working capital changes in the last three years which offset a good portion of operating losses. In 2018, positive cash from insurance reserves and accrued liabilities offset $740 million of the $911 million net loss. We think it’s unlikely that the company will continue to see the same level of positive working capital changes year after year. Looking at operating cashflow without these positive adjustments, Lyft has enough cash for only three years of operations at the current burn rate.
As an offset to the operations burn, the company spent $250 million buying another company last year, contributing to a big cash burn from investing. If management takes a break from buying companies, the cash burn from 2018 will be at least 30% lower, giving the company an extra 10 months to operate before the cash is gone.
Years of cash is so important because Lyft is up against the clock to turn a profit before their money runs out. In the roadshow presentations, management would not commit to a timeline to turn a profit so this is the big unknown hanging over the stock.
Realistically, with interest rates low and a risk-on mood in the market, Lyft can continue to issue stock and debt to fund operations if needed. The longer losses continue the higher the risk that the company may be unable to raise money when it needs it most, sparking a fall in the stock price and a hostile takeover by a financial or strategic buyer.
SO SHOULD I BUY SHARES OF THE LYFT IPO?
Even though we’ve spent most of our time talking about the fundamental opportunities and risks for Lyft, we are not naïve, and readily admit that overvalued stocks can go higher, and undervalued stocks can fall.
Over time, the public trading price of Lyft should approach its underlying value, which we think is lower than the IPO price, but in the short-term, the stock will trade on sentiment and supply/demand.
A reader of ours made a very smart comment about the IPO. Lyft is just the appetizer before the main course, the Uber IPO.
I’m in they won’t tank this IPO. The float isn’t big initially from what I’ve read. Bankers will want the Uber IPO this is the foreplay to the main event
Seeing as Lyft is the first ride-hailing company to go public, banks want the IPO to go smoothly to make sure investor appetite for future ride-hailing stock offerings remains strong. Bankers are also fighting to get a piece of the upcoming Uber IPO and will likely use a successful debut from Lyft as a sales pitch to participate in Uber as well.
Lyft has a one to two-month window where it will be the only ride-hailing game in town, not to mention possessing one of the fastest revenue growth rates of any publicly traded company. Judging by the small public float (11% of shares), the oversubscribed Lyft IPO and support from Wall Street, we would be buyers and think the stock should trade well directly after the IPO date on March 28.
PRICE TO SALES WILL DRIVE THE STOCK, NOT CASHFLOW
Our positive opinion on the stock, despite all of the uncertainty around profitability, stems from understanding how the market values high growth companies like Lyft. The Lyft IPO is priced off of sales and in the current risk-on market environment, this will remain the preferred metric.
Historically high growth tech companies see their IPO multiple compress by 10% a year. As long as Lyft can grow revenue by faster than 10% a year the company should see a rising stock price in this market environment. We estimate Lyft will grow revenue at least 20% a year over the next 10 years, pointing to a rising stock price even if the company fails to turn a profit.
The theoretical stock price below assumes 22% revenue growth on average over the next 12 years and a multiple that falls 10% a year from 7.2x in 2019 to 3x by 2028 where it stays.
TRADE LYFT DON’T OWN IT
We would own Lyft stock only until the end of April or May. Once Uber goes public, it’s market-leading position may attract investors away from Lyft, putting pressure on the stock price. More importantly, Lyft’s insider share lockup expires Sept. 2.
Lockup expirations almost always leads to short-term pressure on a company’s share price as company employees and insiders who are sitting on large unrealized gains attempt to cash out by selling their shares on the open market. Considering the average insider has a cost basis of $23/sh and the stock will open above $60, the incentive to sell on Sept. 2 is high.
OUR CONCLUSION
Overall the Lyft IPO presents a compelling way to play the rise of the part-time “gig” economy.
If the company can exploit new streams of revenue and maintain or grow its U.S. market share, the company will eventually be able to stand on its own two feet without additional cash from the market. But until that time comes, we think this stock is a trading vehicle and nothing more.
via ZeroHedge News https://ift.tt/2V0bYuU Tyler Durden
Following the violent plunge in yields earlier this week and especially on Tuesday night into Wednesday morning, Nomura’s Charlie McElligott summarized the recent rates action as “Scary Hours” in a bond market rocked by “Crazy, Panicky” moves. This full-blown capitulation by bond shorts, prompted by market expectations of not one but two rate cuts in the coming year, caught many by surprise and resulted in massive losses for any last traces of the “reflation” trade.
Looking at today’s market action, this “breakdown in rates and equities” appears to have fizzled for now, and we are finally seeing some tactical selling in the front-end “downside” – especially after yesterday’s widely discussed $40 million “EDZ9 put condor trade” leading McElligott to suggest that the front-end move has finally “overshot,” in conjunction with reversals in swap spreads, as the forced convexity hedgers look to be adjusted for now, potentially moderating the key driver of the multi-day panicky Rates move.
But the damage has already been done.
Recall that one month ago we reported that the MOVE index, which tracks 1 month bond volatility, just hit an all time low, and advised traders to “enjoy the record low treasury vol while you can (and can buy it cheap) – it won’t last. And if and when MOVE moves higher (potentially in a rather explosive fashion), expect the spillover from any sharp repricing of volatility at this fulcrum asset class to hit all other assets promptly.“
One month later, that’s precisely what happened, because even as today’s reversal in rates may provide some modest relief for Systematic rate vol carry strategies where many have lost the entirety of the year’s gains over the past two weeks after suffering yet-another 3 sigma z-score drawdown yesterday as bond volatility indeed exploded, as we warned it would in late February.
In fact, according to McElligott, the “Merrill’s MOVE index has seen its fourth-largest cumulative 5-d move of the past 30 years” a five sigma event.
It wasn’t just bond traders that got carted out in the last few days.
As McElligott writes in his daily note, yesterday was also the fourth-worst day for his model hedge fund long/short book year-to-date, “as chronically hated Value- screamed higher and Quality- again outperformed on the session, while crowded “Growth-y” Cash / Assets-, Sales Growth- and R&D / EV- factors were all hit meaningfully lower.”
As a result, the past three sessions appear to have seen a modest “gross-down” flow going-through as the dreaded “Shorts outperforming your Longs” dynamic drags on performance as hedge funds once again were violently reversed on the most popular, consensus positions:
“Most Shorted” (+1.4% cumulative 3d move), “High Short Interest” (+1.3%), “2018 Worst Performers” (+1.0%), “1Y Momentum Shorts” (+0.7%), “Most Shorted Large Caps” +0.7%”
“Momentum Longs” (-0.8% in 3d), “Hedge Fund Longs” (-0.8%), “2018 Best Performers” (-0.7%), “1Y Momentum Longs” (-0.6%), “HF Top 50” (-0.4%) and “HF Overweights” (-0.2%)
There is another potential catalyst for the intraday swoons observed this week: as the Nomura strategist notes, we have seen recurring mini S&P reversals late in the EU session, suggesting rebalance-looking flows out of Europe, which have “clearly been a large part of the stock pressure.”
Also worth noting is that at the same time during the day, 10Y yields have rallied…
… suggesting this may be part of the notorious quarter-end pension fund rebalancing trade.
The threat of continued pension-rebalancing into month end aside, there have been several other technical reasons for the recurring equity weakness in recent days, as laid out by Elligott:
The recent downtrade in S&P has seen us near the S&P Systematic Trend “sell / deleveraging trigger” levels..but still yet to trade through / close below it
Our “forward dropoff” analysis for the CTA Trend SPX model shows that we have approximately 5 days left (first 5d ‘red block’ in forward signal table below) of the “mechanical” pulling-HIGHER of the “SELL TRIGGER” closer to “spot,” before then again reverting “out of the danger zone” and heading LOWER for the following THREE sessions thereafter (meaning “sell trigger” drops further below “spot” again—see days 6,7 and 8 below)
Importantly however as a forward “U.S. EQUITIES PULLBACK WINDOW” catalyst, we will again see the “sell triggers” again moving mechanically higher out nine days from here—and WAY HIGHER OUT THREE WEEKS (second red block highlight, starting at the 9d count on top):
Yet having previously warned about the “pullback window”, McElligott now specifies the timing of the event, noting that “it has to happen now”, as he currently sestimate SPX/SPY consolidated Dealer Gamma to turn “negative” in approximately the same area ~2790 area the bank’s CTA pivot leve… “so this next five days is the “PEAK WINDOW” for this “alignment” of Dealer Gamma, Rebalancing flows and CTA sell triggers.“
That said, something does not add up: why after such a violent “volatility quake” in bonds have stocks remained oddly resilient (with the exception of last Friday’s violent plunge)? According to McElligott, two reasons explain why equities continue to “hold”:
“Spot” S&P still remains meaningfully above CTA sell-triggers (SPX and even moreso NDX remain comfortably “Max Long,” although position sizes / $ exposure is just a fraction of last year’s Jan18 / Sep18 peaks)
Dealer “long Gamma” remains at current levels and “holds” us, only turning “negative” (per our latest inputs) approx 20 handles lower in SPX ~ 2790
Which means that if stocks can resist a late March dump, it may be smooth sailing, as looking ahead into April, three drivers emerge:
“Seasonals” out the first two weeks of April shows a very growth-y “Cyclicals over Defensives” trend since 1994
The “Rebalance Analog” shows very POSITIVE out-trade as a “post April 1” SPX upside catalyst—especially looking-out the 5-6 days after (see table below):
Finally, Mid-April will earnings “kickoff,” which sees PMs “tune out macro noise” and also means that corporates will thereafter begin to emerge from the “blackout”—particular Banks which have certainly been a negative optic of the past few weeks in light of the rates move
Putting all this together, and looking at the near future, McElligott predicts that the marginal pressure for US equities is likely to tilt positive for the S&P500 as we push into April for the following reasons:
Yes, Systematic Trend “sell triggers” in SPX again move mechanically / dangerously higher looking-out nine days (and WAY HIGHER 3 weeks out)—but in meantime, Spot remains well above said pivot levels
Spot also remains above dealer Gamma pivot (comfortably in “long gamma” zone currently)
“EPS commencement” in mid-April when Equities PMs “tune out macro noise”
Emergence from the “Buyback Blackout” at same time (for Banks especially)
“Extreme Pension Rebalancing” analog turns positive the 1w after the “turn”
Powerful seasonal since ’94 with USEQ “Cyclicals over Defensives” over the first two weeks of April.
Until then, however, watch out for even more bond market volatility and additional multi-sigma events in the MOVE index, which if extended to far, threaten to completely destabilize the market’s benign transition from the late-March “pullback window” into the April “rebound window.”
via ZeroHedge News https://ift.tt/2HWV9NK Tyler Durden
Here’s the good news: Utah is finally raising its low cap on the amount of alcohol allowed in beers sold in grocery and convenience stores.
Now the bad news: The new law only raises the cap from 3.2 percent to 4.8 percent. Of the 18 states that currently have caps on alcohol, the average cap is 12.4 percent, so Utah’s new rules are still remarkably restrictive.
The Salt Lake Tribunereports that on Tuesday, Republican Gov. Gary Herbert signed SB132, which eases Utah’s retail beer laws, but only a little. The law will also raise state taxes on beer barrels from $12.80 to $13.10, to pay for enforcement. The new regulations will go into effect November 1.
This is the first time Utah’s beer cap has been raised in 86 years. The original cap was set by the Cullen-Harrison Act, passed in Congress almost a year before national Prohibition ended. This allowed Americans to consume low-alcohol beers, which, at the time, was better than having no beer at all. When Prohibition was repealed, Utah was one of the few states that continued to observe Cullen-Harrison.
Utah’s draconian alcohol laws have been in the spotlight before. In 2016, for example, Salt Lake City theater Brewvies’ liquor license was jeopardized after showing Deadpool. The state’s Department of Alcoholic Beverage Control (DABC) prohibited any licensed establishment, which included the alcohol-serving theater, from showing anything depicting a sexual act. Two Utah Bureau of Investigation agents watched the movie at the theater while undercover and reported that Ryan Reynolds’ numerous sex scenes caused the theater to be in full violation of the DABC’s rules. (The agents’ report included a thoroughly detailed note about a masturbation scene with a unicorn.) Threatened with a 10-day license suspension and/or a fine between $1,000 and $25,000, the Brewvies’ owners filed a lawsuit; a U.S. district judge eventually ruled in the theater’s favor, saying that the state’s actions violated the theater’s First Amendment rights.
While many states continue to enforce outdated and inconsistent alcohol laws, Utah’s are especially in need of reform. The best way to do this is simple: Stop imposing these caps completely, and let the consumers decide what they want to drink.
President Trump, in an exclusive wide-ranging interview Wednesday night with Fox News’ “Hannity,” vowed to release the full and unredacted Foreign Intelligence Surveillance Act (FISA) warrants and related documents used by the FBI to probe his campaign, saying he wants to “get to the bottom” of how the long-running Russia collusion narrative began.
Trump told anchor Sean Hannity that his lawyers previously had advised him not to take that dramatic step out of fear that it could be considered obstruction of justice.
“I do, I have plans to declassify and release. I have plans to absolutely release,”Trump said. “I have some very talented people working for me, lawyers, they really didn’t want me to do it early on.”
Trump also accused FBI officials of committing “treason” — slamming former FBI Director James Comey as a “terrible guy,” former CIA Director John Brennan as potentially mentally ill, and Democrat House Intelligence Committee Chairman Adam Schiff as a criminal.
Redacted versions of FISA documents already released have revealed that the FBI extensively relied on documents produced by Christopher Steele, an anti-Trump British ex-spy working for a firm funded by the Hillary Clinton campaign and Democratic National Committee, to surveil Trump aide Carter Page.
At least one senior DOJ official had apparent concerns Steele was unreliable, according to text messages exclusively obtained last week by Fox News.
via ZeroHedge News https://ift.tt/2JL7ua9 Tyler Durden
The Supreme Court has declined to stop the Trump administration from enforcing its ban on “bump-stock” devices, which allow semi-automatic weapons to fire like machine guns.
Ahead of the ban, which took effect on Tuesday, gun right groups had asked the court to stop the government from enforcing the ban.
“This case represents the single biggest A.T.F. seizure of private property in history,”their lawyers wrote, “made even more noxious because all existing bump stocks were manufactured and purchased in accordance with A.T.F. rulings approving their sale.”
Under the regulation, Americans who own bump stocks have 90 days to destroy their devices or to turn them in to the Bureau of Alcohol, Tobacco, Firearms and Explosives. An appeals court previously exempted specific people and groups involved in the Washington case from the ban while that case continues.
Solicitor General Noel J. Francisco, representing the administration, urged the justices to deny the stay in the case, Gun Owners of America v. Barr, No. 18A963.
“The protection of the public and law enforcement officers from the proliferation of prohibited firearms is a bedrock foundation of federal firearms legislation,” he wrote, adding that the regulation “promotes that public interest by protecting the public from the dangers posed by machine guns prohibited by federal law.”
And now, as AP reports, Chief Justice John Roberts declined one request for the court to get involved on Tuesday and a second request was declined by the court on Thursday.
The administration’s ban puts it in the unusual position of arguing against gun rights groups.
via ZeroHedge News https://ift.tt/2uyR9et Tyler Durden
That is simply wrong, and it betrays The Economist‘s unfamiliarity with what the term “alt-right” means. No, Shapiro is not part of it. In fact, Shapiro has been a target of online harassment from some of the alt-right’s members.
This isn’t 
Here’s the good news: Utah is finally raising its low cap on the amount of alcohol allowed in beers sold in grocery and convenience stores.
