Lyft’s Shares Jump in Trading Debut, Cementing Rise of the Gig Economy

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SAN FRANCISCO — Owning a piece of the gig economy became a reality for millions on Friday when Lyft began trading on the public markets, signaling the start of a stream of stock offerings expected from high-profile technology companies this year.

Lyft’s shares rose 8.7 percent in its first day of trading after opening at $87.24, far above the public offering price of $72. By the end of the day, the ride-hailing firm’s market value stood at $26.4 billion, making it one of the most valuable American companies to go public in the last decade. At that level, it was more than 23 times the valuation of the parent company of Hertz, the rental car provider, and bigger than the parent of United Airlines.

Lyft’s public market debut formalized the rise of the sharing economy, even though persistent questions remain about the effect of gig-type work on people’s quality of life and their wages. When ride-hailing companies like Lyft and Uber began growing this decade, they hawked their kind of work — where drivers are freelancers who drive only when they want to — as providing flexibility. But with drivers ineligible to receive employee benefits like health care, the businesses have since prompted lawsuits and labor protests.

Gig economy companies also have not proved a business fundamental: that they can make money. While Lyft and Uber have been expanding rapidly, they have lost close to or more than $1 billion a year. And the companies are spending heavily on new initiatives like food delivery, electric bikes and self-driving vehicles, making profits a distant prospect.

[Unicorns are riding into the public markets, and their elite early investors will be the biggest winners.]

Even so, Lyft’s offering means that people will now own shares of the company in their mutual funds and stock portfolios, giving them more of a vested interest in the financial outcomes of gig economy firms. That will be compounded when Uber, the world’s biggest ride-hailing operator, goes public in the next few months in what is expected to be the largest initial public offering of the past five years. Uber will almost certainly become part of index funds, which underlie the retirement portfolios of millions of Americans.

“Their business model is completely reliant on an unsettled issue, which is the status of their drivers,” Veena Dubal, an employment and labor law professor at the University of California’s Hastings College of the Law, said of ride-hailing companies. “They’ve been trying to shift risk onto workers, and now they are shifting risk onto investors as well.”

Those risks sent jitters through some investors on Friday, with Lyft’s shares falling after opening up strongly. The stock dipped to roughly $80 before declining further near the end of trading to finish the day at $78.29.

“We want Lyft to be the first app that you open up,” he said. “The biggest investments we’re making today are broadening the portfolio of products that you can access within Lyft.”

The offering increased Mr. Green’s and Mr. Zimmer’s wealth, while allowing them to maintain tight control over their company. The pair hold a special class of shares that give them extra voting power, a practice common among tech founders but criticized by investor advocates.

During the nearly two-week road show, Lyft pitched itself to institutional investors as a mission-driven company focused on reshaping the transportation industry. It emphasized its do-gooder stance on encouraging car-pooling and reducing the environmental impacts of individual car ownership.

Investors’ most frequent question during the road show was what the company would look like in five years, Mr. Zimmer said. “Investors realized that ride-sharing is the tip of the iceberg,” he said.

Using independent contractors to provide services has indubitably become the keystone of a generation of tech companies, from ride-hailing apps to food delivery services like DoorDash to hair and makeup services like Glamsquad. Some researchers said contingent work could account for 43 percent of the American work force by next year, though the Department of Labor has reported that the number of workers in gig roles has remained mostly flat since 2005.

“I think it’s quite clear that this is part of a larger trend in the economy,” said Sean Aggarwal, Lyft’s chairman. “That makes it an exciting story for the long-term investor. It gives them an opportunity to participate not just in this gig economy transformation but also in this larger trend of transportation as a service.”

Mr. White of D. A. Davidson said the good will toward Lyft would eventually evaporate if it ultimately couldn’t make money.

“As we get closer to 2020, there will be an expectation that we see them narrow the losses,” he said.

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