Diversified Bullish

Musings About Investing (Not Financial Advice)

May 13, 2023

Getting Out of LYFT Stock

I'm an advocate for "buy and hold" investing, meaning if you are making an investment it should be for a long period of time before selling. However, you may need to cut a position due to a company's failure to turn a profit or dependency on bending public policies to their favor. This was the case with LYFT, based in California, the battleground of workers rights that shifted over the years as ridesharing went mainstream.

I saw a game-changing service to society helping people get where they needed to go. I also moonlighted as a LYFT driver for a few months in 2017, seeing first-hand how they onboarded drivers. LYFT filed an IPO in March 2019. I had $2,600 to invest and wanted a piece of those huge ridesharing profits that were going to happen someday. In retrospect, this was too speculative of an investment. LYFT was growing riders, but profitability hadn't been proven yet. Being in my 20s, I was just starting to invest and eager to start buying stocks with the extra money I had.

I paid $65 per share for LYFT shortly after its IPO (Initial Public Offering) in 2019, under the IPO price of $72. Another lesson from this trade is that it more risky to buy an IPO close to its debut in public trading. But I couldn't resist so I put it on LYFT shares.

Another thing I learned from holding LYFT stock is to consider the risk of political impacts on your stocks. In the case of LYFT, they and UBER were typically involved in regulatory battles with the state of California over the classification of their drivers in the past 10 years. Are rideshare driver independent contractors? The debate continues. And each time it blew up on the news, I looked at those shares and thought... I signed up for this? Court battles. A questionable public image and an unprofitable business to boot. Having tried LYFT's rideshare services myself, I thought their culture was strong and they'd be a leader in a promising new industry. We'll see if they ever make it.


source, Bing: https://www.bing.com/search?q=lyft+stock

They closed around $8 per share yesterday. My investment? Within the first year, I was already down considerably and endured several painful earnings reports. They were nearly profitable, but then were hit hard by pandemic lockdown. I sold out from 2021 to 2022, selling each share at a loss. 90% of the shares were sold in June to October 2021 near the end of the most recent bull market. Only with hindsight, can I now say I feel strongly it was the right call. If I had left the money there, I'd be sitting on $375 in market value in Lyft and over $2,000 of unrealized losses.

I sold the position incrementally, ranging from $38 - $63 per share. I sold my last 5 shares at $38 per share in Feb. 2022. Having cleared the position, I now know from experience, there are times when you should cut your losses. In total, I limited the damage to $546 lost and re-allocated the remaining $2K to other investments.

Looking at LYFT in 2023, it's down 89% over the past 5 years, unprofitable with a real possibility of bankruptcy. Recently, the founders have stepped back from operating the company. They're also low-key saying they're open to a buyout. Maybe they will turn it around, but I'm no longer on the hook for a few grand if they don't. I now try to buy companies that have already established profitability and growing. This is my LYFT story, may we all stay away from such investments and realize quickly if we've miscalculated.