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A Tale Of 2 IPOs: Lyft Vs. Levi's


Tale of two IPOs now - one, a company that's produced an iconic product for nearly a century-and-a-half; the other, a service provider that's just been losing more and more money every year but has just cashed in. How is that possible? NPR's Jim Zarroli joins us from New York.

Jim, thanks so much for being with us.

JIM ZARROLI, BYLINE: You're welcome. Hi, Scott.

SIMON: The - this week, the ride-sharing company Lyft started trading on NASDAQ. Its initial public offering did very well, indeed, even though it's the No. 2 ride-sharing app after Uber and all it's done for years is lose money. So is - why is Wall Street so eager to throw money at them?

ZARROLI: Yeah, it did do well. Lyft was able to price its shares at $72 each, which was $5 or $10 higher than it was supposed to start at, and then it rose to a little more than $78 by the end of trading yesterday. And the reason it's in demand is just that traders see a lot of potential. I mean, the ride-hailing business didn't even exist a decade ago, and now it's just growing enormously. It is changing people's lives, especially in big cities. And some estimates are that it will grow fourfold by the end of the next decade.

You know, Lyft may be No. 2 right now, but its share of the market is growing. So traders just look at Lyft as a company with a lot of promise, and that is what matters on Wall Street.

SIMON: Should we pause there to think about the dot-com bubble, which didn't turn out so well? Is there - there is a danger that Lyft could wind up being a dud, isn't there?

ZARROLI: Yeah. I mean, there's always that danger. There are lots of reasons to be really cautious about investing in a company like Lyft. For one thing, it lost $911 million last year, and that was a lot more than the year before. Now, I should say that is not unusual for tech companies. They need to spend a lot in the early days so they can make money down the road. So Lyft is investing in drivers and marketing and equipment.

But still, there are a lot of red flags about the future of a company like Lyft. And both Uber and Lyft are facing a lot of pressure to pay their drivers more. So whether it will be profitable is anybody's guess.

SIMON: The other company we want to talk about right now is Levi Strauss. They went public earlier this month - one of the oldest brand names in America, worn all over the world. I've got them on now, along with millions of other people today. What took them so long to go public?

ZARROLI: Well, it was - Levi Strauss was publicly traded beginning in 1971. And then in 1985, it was taken private again. It's had a lot of ups and downs over the years. It had a big hit with Dockers, for instance, in the '90s. Then it faded, as it were. Now it's got a new CEO, Charles Bergh. You know, the company's profitable, and there's some optimism about it - but not nearly as much as there is with Lyft.

SIMON: So here's what I don't understand. Lyft is basically an app that links riders and drivers; it produces nothing. And I use it a lot. Levi Strauss produces an identifiable product worn all over the world. I don't understand why there's so much enthusiasm for an app that hasn't produced a profit but not as much in an iconic company that's been around for more than a century.

ZARROLI: Yeah, it is - it's a paradox. I mean, these two companies are about as different as they can be. You know, Lyft is 6 years old. Levi Strauss dates back to, you know, just before Minnesota became a state. Lyft loses money; Levi Strauss is profitable. Now, when Wall Street looks at Levi Strauss, it sees a company with some potential. But it is in retail, which is a really just brutally tough, competitive business right now.

So there's some room to grow, but it is limited. It is nothing like the potential there is with Lyft. I mean, Lyft is a risky stock to buy. But if it succeeds, it just has huge upside potential. I mean, you know, traders on Wall Street go to bed at night dreaming of getting some big transformational stock like an Amazon or an Apple. And a lot of traders are betting that Lyft could be one of those.

SIMON: NPR's Jim Zarroli, thanks so much.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.