Despite all the red flags, the rise of passive investing forces too many institutions to unconditionally buy a big IPO like Lyft.
With all these concerns, you’d expect investors to balk at Lyft’s lofty valuation. Instead, the IPO is reportedly oversubscribed and will price
When a major IPO like Lyft comes along with a market cap over $20 billion, it instantly becomes a significant portion of the market. For funds that focus on IPOs or tech stocks specifically [e.g. the Renaissance IPO ETF ], Lyft will be an even greater portion of their benchmark. These buyers don’t question Lyft’s business model or its corporate governance, they unconditionally buy simply to gain exposure to a high-profile name.
A successful IPO for Lyft could mean more fees from forthcoming IPOs. In other words, the more demand underwriters drive for this deal, the better their position to get a cut of upcoming IPOs like Uber, Pinterest, Airbnb, and others.Poor Corporate Governance Is Now the Norm
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