Lyft off? Former investment banker warns investors to be cautious

We have Lyft off.

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Shares of the ride-share company surged more than 20 percent during its Nasdaq debut Friday, ending the day off session highs and putting the company’s valuation of about $22 billion.

“We didn’t used to be able to take companies like this public,” market experts Carol Roth said during an interview on “After The Bell” Friday. “The market right now pays more for possibilities than realities.”

Roth, who takes a conservative stance on the new Lyft initial public offering (IPO), warns investors need to look at the fundamentals of the stock.

“This is a company that has negative cash flow, and but it’s spending to juice revenue. This is a very dangerous type of company for the average retail investors, it’s really great for the VCs.”

She suggests retail investors should concern themselves with the long-term outcome of ride-sharing companies.

However, Layfield Report CEO John Layfield acknowledges the advantage of being the first in the market.

“They are beneficiary in a huge way of being the first going for IPO, because it’s a matter of supply and demand. This IPO was over-subscribed, which means that retail investors did not get into it until today.”

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As investors are hopping to jump on this band wagon, Layfield says, he worries about the valuation of Lyft.

“But as far as the story itself, it’s a great story. It shows how much money is out there to chasing yield.”

Lyft’s main rival Uber is expected to make its IPO debut later this year. FOX Business’ Jaimie La Bella took to the streets of New York City and asked commuters whether they prefer Lyft, Uber or a taxi.

As for the future trend of transportation, ride-hailing companies are eying autonomous driving as the next prospect to hit of the market.

“It’s very challenging some time to be the early movers in the market, because then the market leap-frogs you, and we don’t know,” Roth said. “They could end up being a big player, they could be the mechanism and the platform for autonomous cars, or there could be a different platform that’s developed – that’s just one of those big questions that’s out there. "It’s the type of stock you have to keep very close eye on.”