Airbnb valuation reaches US$100 billion in trading debut surge
Airbnb Inc. shares more than doubled in their trading debut, propelling the home-rental company to about a US$100 billion valuation and one of the biggest first-day rallies on record.
The shares closed Thursday at US$144.71 up 113 per cent from the US$68 initial public offering price. The listing came 10 months after the COVID-19 pandemic upended travel and 24 hours after DoorDash Inc. 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 per cent 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 chief executive officer Brian Chesky said in an earlier Bloomberg Television interview, when indications showed the stock could open at more than US$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 US$86.5-billion market value narrowly tops Booking Holdings Inc.'s US$86.2-billion market capitalization, and eclipses Expedia Group Inc. and TripAdvisor Inc. Airbnb's market value, about 19 or 20 times its 2021 revenue at the opening price Thursday, also topped that of the four largest public hotel chains combined.
San Francisco-based Airbnb's fully diluted valuation is even higher, around US$100 billion including employee stock options and restricted stock units.
Alfred Lin, a Sequoia Capital partner who sits on the boards of both Airbnb and DoorDash, said the past two days have been a blur. Strong investor demand shows investors recognize Airbnb's potential, he said.
“We've seen how resilient this business model is and we've seen the company stare into the abyss of a pandemic that shut down global travel and figure their way out of it,” Lin said.
DoorDash's debut surge — elevating its fully diluted value to about US$71 billion — 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 US$8.3-billion 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 this month include video-game company Roblox Corp., instalment loans provider Affirm Holdings Inc. and Context-Logic Inc., the parent of online discount retailer Wish Inc. Those listings will add to what is already a record year for IPOs, with more than US$167 billion raised on U.S.
exchanges, including Airbnb and DoorDash, the data show.
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.
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 per cent. Airbnb rolled out a blanket refund policy and doled out more than US$1 billion 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 of the top 20 cities proved resilient.
In the third quarter, Airbnb's revenue declined only 18 per cent, compared to the near 60 per cent decline for Expedia and Marriott International Inc.
The three-month period was also Airbnb's most profitable ever when adjusted for earnings before interest, taxes, depreciation and amortization.