66,104% gain... vs… -79% loss!
Lyft is a perfect case study of the new reality of the investing world.
In the past, companies wanted to go public for easy access to capital. More money means more growth opportunities. Retail investors used to be able to get in early-stage companies.
But not anymore.
Because of the explosion of private equity and venture capitalists, there’s so much money available in the private markets. As a result, companies are going public later than ever…
…when the greatest growth is in the rearview.
Jay Clayton, the former Chairman of the SEC, admitted this in the following quote where he said retail investors have “less access to companies that are well-established, but still growing.”
Now, let’s use Carl Icahn as the perfect example of Wall Street’s gameplan. He bought Pre-IPO shares in Lyft, and he got a heck of a return!
Icahn got in relatively late in 2015 at a valuation of $2.5 billion for Lyft, according to the Wall Street Journal.
And guess what?
He sold his stake right before IPO, which Lyft was valued at $24 billion on the IPO day.
He enjoyed a cool gain of nearly 1,000% in four years.
But those who invested at the IPO day?
They are down by 79%!
We see this happening all the time.
A company’s valuation virtually shoots straight up during Pre-IPO rounds. When its growth begins to slow down, the company goes public and early investors dump their shares to retail investors.
For example, look at how Lyft’s valuation soared by 66,104% in just 8 years.
You can see the chart below:
We see this all the time with Pre-IPO companies. Their valuations often shoot straight up. Why? Their sales could be doubling, or even tripling, every year. Naturally, its valuation will grow, as well. Once its growth begins to slow down, it’s time to go public and cash out.
If you want to adapt to the modern investing world, then it’s absolutely necessary for you to start buying Pre-IPO shares for a chance to enjoy a potentially life-changing return.
