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Zack GuzmanSenior WriterYahoo Finance

Of all the companies expected to go public in 2019, no two will be more closely watched and compared than Uber and Lyft.

Of course, for the two largest U.S. ride-sharing giants that have been battling each other for market share for years, that comparison is nothing new. But as the two companies gear up for initial public offerings the question posed to public investors for the first time will no longer be about which firm can deliver the better ride, but rather, which will deliver a stronger return.

Answering that question will ultimately depend on an array of factors, including the price at which each company begins trading, but there are a few key distinctions between the two worth highlighting.

A sign marks a location where Uber or Lyft pickups are available in downtown Los Angeles, California. (Photo by Smith Collection/Gado/Getty Images)
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First off, Uber is a behemoth and dwarfs Lyft. Both underwriting proposals from Goldman Sachs and Morgan Stanley reportedly projected the 10-year-old startup could be valued at $120 billion when it goes public. At that valuation, Uber could top Alibaba’s (BABA) $25 billion IPO as the largest in history, if it offers up 21% of its shares in the public offering. That percentage would be higher than the historically low amount of shares tech companies have been listing. Lyft, meanwhile, is expected to go public at a valuation of just over $15 billion.

Part of the discrepancy stems from the fact that Uber’s revenue from the 65 countries it operates in far outweigh that of its rival. Lyft, which operates in the U.S. and Canada, racked up just over $1 billion in total revenue last year compared to Uber’s $7.4 billion, according to data compiled by EquityZen, a platform for trading shares in private companies.

Lyft revenue has been growing more quickly than Uber’s, according to Equity Zen.
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Lyft is growing faster than Uber

However, Lyft’s revenue growth has outpaced Uber’s in recent years. From 2014 to 2017, Lyft has seen a compounded annual growth rate of an astounding 223% compared to Uber’s 146% clip over the same time period.

Lyft is also charging towards profitability at a faster pace than its rival. In 2014, Lyft’s net loss as a percentage of annual revenue was -631% compared to Uber’s relatively stronger -136%. By the first half of 2018, however, Lyft has shrunk its losses as a percentage of revenue to just 41% compared to Uber’s -28%.

As Duncan Davidson, co-founder and general partner at venture firm Bullpen Capital, points out, investors tend to look for faster growth rather than profitability out of companies looking to go public. While Uber is technically closer to profitability, that might not matter as much as the rate at which Lyft is growing.

“In the long run, Uber might take the lion’s share of capital in the category,” Davidson told Yahoo Finance. “But if I was a normal investor I’d go into Lyft… there’s more upside being smaller.”

Lyft has also been growing its domestic market share. According to data from Edison Trends, Lyft now controls about 31% of total ride-share spend in the U.S. compared to the low-to-mid teens it saw in 2016. That’s a critical factor to consider, according to Shriram Bhashyam, co-founder of EquityZen, a platform for buying and selling private company shares that’s worked with one out of every three unicorns.

Uber still has the lead in the U.S. ride-sharing market, but Lyft is closing the gap, according to Edison Trends.
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Story Continues

“What typical growth investors will be looking at is who can gain market share,” he said. “You can tolerate [net] losses if there is high revenue growth and it speaks to the story of growth trajectory.”

Race to an IPO

Finally, Lyft is considered to be further along in its plan to go public, having already chosen JPMorgan to underwrite its offering. Uber is still considering Morgan Stanley and Goldman Sachs as its lead underwriter.

By going public first, Lyft may be able to lock up investor money that may have been desperately waiting to get into ride-sharing. That could detract from Uber’s offering should its IPO follow. On the flip side, Lyft could also be harmed by going public first if investors opt to wait for what will likely be a much larger offering from its rival.

That said, making use of a fresh injection of cash could set Lyft up for another spark to catch up to Uber, according to Davidson.

“They could probably use their public currency to make a relatively quick acquisition that might boost their overall offering,” he said.

This is the second installment in a series looking at what to expect in the 2019 IPO market. Our first story highlighted the trends investors need to look out for heading into next year. For the third installment, tune into Yahoo Finance’s Midday Movers on November 20 for a glimpse at the top companies clamoring to own the increasingly crowded food delivery space.

Zack Guzman is a senior writer and on-air reporter covering entrepreneurship, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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