Airbnb valuation soars past $100bn in trading debut
Airbnb shares more than double in one of the biggest first-day rallies on record
New York — Airbnb shares more than doubled in their trading debut on Thursday, propelling the home-rental company to a $100bn-plus valuation and one of the biggest first-day rallies on record.
The stock opened at $146 apiece, above the $68 initial public offering price. The listing comes 10 months after the Covid-19 pandemic upended travel and 24 hours after DoorDash soared in its public debut.
Airbnb joined DoorDash in what is quickly becoming a euphoric moment for new listings in America’s equity markets, egged on by retail investors embracing companies poised to thrive as vaccines promise a loosening of pandemic restrictions. While soaring valuations for IPOs give many market veterans pause, Airbnb is at least earning money, unlike 80% of firms that have sold new shares in 2020. The company just reported its most profitable quarter ever.
“I don’t know what else to say,” Airbnb CEOBrian Chesky said in an earlier Bloomberg Television interview, when indications showed the stock could open at more than $139 per share. “I’m very humbled by it.”
Airbnb’s market value, based on its outstanding shares, makes it the world’s biggest online travel company. Its $88bn market cap exceeds Booking Holdings’s $86bn market capitalisation, and eclipses Expedia and TripAdvisor. The fully diluted valuation is even higher, about $102bn.
DoorDash’s debut surge — elevating its fully diluted value to about $71bn — played a role in Airbnb’s discussion about pricing its IPO above the marketed range, according to people familiar with the matter. An Airbnb representative declined to comment.
To hang on to its lofty valuation, Airbnb will need to grapple with a litany of threats, as outlined in its IPO prospectus, ranging from a surge in party houses that carry liability risks to an increase in professionally run properties that lack the charm that made Airbnb rentals famous.
Airbnb and DoorDash propelled IPO volume to all-time high for December, surpassing the $8.3bn mark set for the month in both 2001 and 2003, according to data compiled by Bloomberg.
There’s more to come. Other consumer-facing web-based companies set to go public in December include video-game company Roblox, instalment loans provider Affirm Holdings and ContextLogic, the parent of online discount retailer Wish. Those listings will add to what is already a record year for IPOs, with more than $166bn raised on US exchanges, including Airbnb and DoorDash, the data show.
Airbnb’s offering was led by Morgan Stanley and Goldman Sachs. Its shares trade on the Nasdaq Global Select Market under the symbol ABNB.
San Francisco-based Airbnb has seen a bounce back in domestic bookings since the early days of the pandemic crushed demand.
“No year in our history has been as wild and crazy and defining as this year,” Chesky said in an earlier interview, from the apartment on Rausch Street in San Francisco where the idea for Airbnb was born in 2007.
In the past 13 years, Airbnb has totally upended the travel market, given people an opportunity for income and created a whole new market for services related to real estate and hosts.
The company’s IPO plans were put on hold in March as the pandemic ground global travel to a halt. By April, room bookings and experiences had plunged 72%. Airbnb rolled out a blanket refund policy and doled out more than $1bn in cancellation fees.
By June, though, things were starting to look up. City dwellers who were sick of being stuck inside their homes got in their cars and drove to mountain towns and rural communities, often setting up for weeks or months at a time as work-from-home policies allowed.
International travel was down, but demand for domestic, short-distance trips and stays outside the top 20 cities proved resilient.
In the third quarter, Airbnb’s revenue declined only 18%, compared to the near 60% decline for Expedia Group Inc. and Marriott International Inc. The three-month period was also Airbnb’s most profitable ever, based on earnings before interest, taxes, depreciation and amortisation.
For the first nine months of 2020, Airbnb had a net loss of $697m on revenue of $2.5bn, compared with a net loss of $323m on revenue of $3.7bn for the same period last year, according to its filings.
Airbnb survived the depths of the crisis by cutting marketing expenses and firing about a quarter of its staff in the spring.
“It’s been an unrelenting year,” Chesky said. “I feel like I’m 39 going on 59 because it feels like we had to make a couple of decade decisions over the last eight months.”
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