Lyft Drops Below I.P.O. Price in Second Day of Trading

SAN FRANCISCO — Lyft’s debut on the stock market is off to a bumpy start.

The ride-hailing company went public in a blaze of glory on Friday, as its stock jumped 8.7 percent from its initial public offering price of $72 a share. On Monday, in its second day of trading, Lyft’s stock plunged nearly 12 percent to below $72, closing the day at $69.01.

The rapid decline raises questions about investors’ appetite for fast-growing but unprofitable tech companies. While Lyft has been expanding and gaining new revenue, it lost nearly $1 billion last year. Ride-hailing companies often subsidize the cost of rides and pay incentives to drivers, which is expensive. And Lyft is also spending heavily on initiatives including electric bikes and self-driving technology.

Other tech companies that went public while recording large losses, such as Snap, Twitter and Groupon, also eventually fell below their offering prices.

“Everyone is taken up with the idea of the ride-hailing business; it’s exciting and high-growth,” said Kathleen Smith, a principal at Renaissance Capital, which manages an I.P.O.-focused exchange-traded fund that will include Lyft later this week. “But it’s hard to figure out their valuation.”

Lyft declined to comment.

[Not everyone who invested in Lyft is reaping the spoils.]

Lyft’s performance could sway other high-profile tech companies that are planning to go public.

Uber, the world’s biggest ride-hailing company, is planning to go public in the next few months; it is also deeply unprofitable. Others stampeding toward the public market include Pinterest, the digital pin board; Slack, the messaging company; and Peloton, the home-fitness company.

“The ones following in the wake of Lyft will be priced more reasonably,” Ms. Smith said.

Even if Lyft eventually makes money, its margins might be low, she cautioned. Lyft is constantly dealing with new competitors, which means that it may have to continue subsidizing its drivers and cutting the prices that it charges passengers. That makes profits a faraway prospect.

The volatility in Lyft’s stock was not unexpected, said Tom White, a senior vice president at the wealth management firm D. A. Davidson. “Nothing has changed on the fundamental outlook for the business in the last few days,” he said.

Follow Kate Conger on Twitter: @kateconger.

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