Travelling far and wide: Airbnb’s IPO smashes 2020 records

Airbnb made a comeback as coronavirus-wary travellers showed a preference for renting private homes over hotel rooms.

Founded in 2008 as a way to book rooms during conferences, Airbnb had a listing that was one of the most anticipated initial public offerings of 2020 in the United States [File: Andrew Harrer/Bloomberg]

Shares of Airbnb Inc more than doubled in the company’s stock market debut on Thursday, valuing the home rental firm at just over $100bn in the biggest United States initial public offering of 2020 and capping a bumper year in which investors flocked to tech stocks.

Airbnb opened at $146 on the Nasdaq, far above the initial public offering (IPO) price of $68 per share that raised $3.5bn for the company. The stock hit a high of $165 and closed at $144.71.

The IPO is the culmination of a stunning recovery in Airbnb’s fortunes after the firm’s business was heavily damaged by the COVID-19 pandemic earlier this year.

But as lockdowns eased, more travellers opted to book homes instead of hotels, helping Airbnb post a surprise profit for the third quarter. The San Francisco-based firm also gained from increased interest in renting homes away from major cities.

“I don’t think this summer too many people expected to see an Airbnb IPO this year,” Airbnb Chief Executive Brian Chesky told Reuters News Agency in an interview.

“We were planning on going public, we put our IPO on hold and this has been the most unbelievable journey. It’s been quite a comeback for our hosts and for what I hope will be travel,” added Chesky, whose Airbnb stake is now worth around $11bn.

Founded in 2008 as a website to take bookings for rooms during conferences, Airbnb had a listing that was one of the most anticipated US IPOs of 2020, which has already been a record year for stock market listings.

Record label Warner Music Group, data analytics firm Palantir Technologies and data warehouse company Snowflake Inc have all gone public in the past few months.

At the start of trading on the Nasdaq, Airbnb had a market capitalization of $86.5bn, eclipsing that of online travel agency Booking Holdings Inc and hotel chain Marriott International Inc.

Including securities such as options and restricted stock units, Airbnb’s fully diluted valuation came to $100.7bn, more than five times the $18bn Airbnb was valued at in a private fundraising round in April at the outset of the pandemic.

Airbnb’s worth was pegged at $31bn in its last pre-COVID-19 private fundraising in 2017.

The eye-popping rise in Airbnb’s stock on its debut comes just a day after the share price of food delivery company DoorDash Inc doubled in its first day of trading.

Such large first-day trading gains are likely to fuel criticism from some venture capital investors, including Benchmark’s Bill Gurley, who argue investment banks underprice IPOs so their investor clients can score large gains when the stock starts trading.

Such advocates have pushed for companies to consider listing shares through a direct listing, in which bankers have little influence on the price at which stock is sold.

Chesky said Airbnb would focus on the things that were within the company’s control.

“At this point, the price of stock is not something we control. I’ve encouraged our employees to focus on things they can control,” Chesky said, speaking before the stock had started trading.

Source: Reuters