As Lyft IPO nears, traders wonder whether the numbers match the hype

“I think buying new offerings in a hot market is something the average investor should not think about at all.” said Warren Buffett on CNBC Thursday, when asked about buying into the Lyft IPO, which is scheduled to begin trading on Friday.

I got a call from a trader friend Thursday afternoon, someone who’s been trading IPOs for a long time. Like a lot of traders, he’s a bit baffled by the Lyft phenomenon.

“The economics are completely upside down, and their biggest competitor is coming in the next few months,” the trader said. “And guys are just guys falling all over themselves to get in on the deal. And they can’t get in. They’re telling me, ’If I get 5,000 shares I’ll be happy.”

My friend, who must be anonymous, is trying to separate the Lyft fundamentals from the action of the markets in general. He understands that the IPO market is hot because it’s been closed for four months, the stock market is up 12 percent this quarter, there’s a very limited float of about 13 percent and Lyft is a well-known name.

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