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Lyft and Uber lure people with low fares, but how long will cheap ride-sharing last? | MarketWatch

Ridesharing giant Lyft went public on March 28 and, earlier this month, its bigger rival Uber said it will soon follow with its own IPO. The IPO prospectus for Lyft and the initial filing to the Securities and Exchange Commission by Uber lift the veil for the first time on the sustainability of their business models and — for now, at least — their low prices.

Ride-sharing services are designed to undercut traditional taxi cabs by allowing passengers to share a ride for a cheaper price. Ideally, this results in higher revenue for the driver, but only if they manage to pick up other customers en route. If one person takes a ride-share and the driver finds no other passengers, the Uber or Lyft driver may end up losing money. Following their respective IPOs, both companies will be under increased pressure from investors to turn a profit.

The IPO prospectus for Lyft and the initial SEC filing by Uber lift the veil for the first time on the sustainability of their business models and low prices.
Lyft and Uber sprung up almost exactly 100 years after Henry Ford first unveiled his Model T. Ford’s popular car began the long U.S. love affair with car ownership. Ride-sharing is arguably the next transportation revolution. At least, that’s what Uber and Lyft investors hope.

At the moment, both companies are losing money. Your rides are effectively being underwritten by venture capitalists who have financed the companies. Uber has collected a total of $13.6 billion in private investment, according to FactSet. Lyft attracted approximately $5.2 billion in private investment prior to its IPO. That begs the question: Will ride-sharing still be a cheap, and attractive, alternative to owning your own car when these companies have to turn a profit?

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Lyft and Uber lure people with low fares, but how long will cheap ride-sharing last? – MarketWatch.

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