By Sebastian Pellejero

Bike and scooter rental companies tend to run out of road. Lime is racing to prove it is an exception, with an initial public offering that concedes the business can't keep rolling without additional funds. Boss Wayne Ting will be pedaling hard to justify the targeted $1.8 billion valuation.

Lime's two-wheelers are now available in 230 cities worldwide. From 2023 to 2025, its average fleet grew about 40% to 325,000. A 70% climb in revenue over the same period suggests each vehicle is spinning faster. The gross margin also expanded to 39% from 32%, evidence of a smoother gear.

After paying off a term loan and converting bonds to equity, Lime's enterprise value would be roughly $1.4 billion if it raises $180 million as planned. Almost $220 million of EBITDA last year would put it at 6.4 times, a deep discount to other on-demand services. Lyft NASDAQ:LYFT trades at 13 times, Uber Technologies NYSE:UBER fetches 20 times and DoorDash NASDAQ:DASH is worth 35 times.

On a multiple of free cash flow, Lime would be worth 13 times, after adding back depreciation and amortization. On that basis, it would be more in range with peers, despite carrying greater risks to successfully implement its strategy.

Sales and profit growth have relied on larger fleets and greater usage; both get harder from here. From Brussels to London, authorities have curbed Lime's scope, citing the clutter of idle bikes and scooters on crowded sidewalks.

Ting is asking investors to look past nine years without a net profit and believe the next few will go differently. Even a favorable run, with free cash flow compounding at 20% a year through 2030, would generate only about $860 million, assuming capital spending stays flat as a proportion of sales, Breakingviews calculates, or barely enough to offset the $800 million Lime has spent on the journey so far.

The market is also littered with urban transport graveyards. Bird went bankrupt after prioritizing fleet growth over sustainable scooter-unit economics. In China, shared bicycle suppliers were absorbed into larger technology companies after cities imposed vehicle caps. Lime has avoided both fates so far, but the ride remains uphill.

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CONTEXT NEWS

Lime, an electric-bike and scooter rental company backed by Uber Technologies, is seeking to raise as much as $181 million in an initial public offering at a valuation of up to $1.8 billion, according to an amended prospectus submitted to securities regulators on June 22.