Airbnb valuation surpasses US $ 100 billion when it debuts trading

Shares of Airbnb Inc. more than doubled in their early trading debut, propelling the home rental company to a valuation of around $ 100 billion US and one of the biggest day one rallies on record.

The shares closed at US $ 144.71 on Thursday, up 113% from the initial public offering price of US $ 68. The list came 10 months after the Covid-19 pandemic disrupted travel and 24 hours after DoorDash Inc. skyrocketed on its public debut.

Airbnb has joined DoorDash in what is quickly becoming a time of euphoria for new listings on U.S. stock markets, encouraged by retail investors embracing businesses poised to thrive as vaccines promise easing pandemic restrictions.

As soaring IPO valuations give many market veterans a break, Airbnb, while unprofitable on a year-over-year basis, made money in the third quarter by cutting costs. Of 200 companies that went public this year, 80% have yet to make money on an annual basis, according to data compiled by Bloomberg.

“I don’t know what else to say,” Airbnb chief executive Brian Chesky said in a previous interview with Bloomberg Television, when indications showed the stock could open to more than US $ 139 per share. “I am very touched by this.”

Airbnb’s market value, based on its outstanding shares, makes it the largest online travel company in the world. Its market value of $ 86.5 billion narrowly exceeds Booking Holdings Inc.’s $ 86.2 billion market capitalization 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.

“Resilient” model

Alfred Lin, a Sequoia Capital partner who sits on the boards of Airbnb and DoorDash, said the past two days have been unclear. 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 look into the abyss of a pandemic that has ended global travel and found a way out,” a Lin said.

The first wave of DoorDash – bringing its fully diluted value to around US $ 71 billion – played a role in Airbnb’s discussions about pricing its IPO above the marketed range, according to people close to the market. case. An Airbnb representative declined to comment.

To hang on to its high valuation, Airbnb will face a litany of threats, as noted in its IPO prospectus, ranging from an increase in party houses that carry liability risks to an increase in properties. managed by professionals who lack the charm that made Airbnb rentals famous.

Registration of the IPO

Airbnb and DoorDash propelled IPO volume to an all-time high in December, surpassing the $ 8.3 billion mark set for the month in 2001 and 2003, according to data compiled by Bloomberg.

There is more to come. Other consumer-oriented web companies slated to go public this month include video game company Roblox Corp., installment loan provider Affirm Holdings Inc., and ContextLogic Inc., the parent company of online retailer Wish. Inc. is already a banner year for IPOs, with more than $ 167 billion raised on U.S. exchanges, including Airbnb and DoorDash, the data shows.

Airbnb’s offering was led by Morgan Stanley and Goldman Sachs Group Inc. Its shares trade on the Nasdaq Global Select Market under the symbol ABNB.

Pandemic crash

San Francisco-based Airbnb has seen a rebound in domestic bookings since the early days of the pandemic that crushed demand.

“No year in our history has been as wild and crazy and defining as this year,” Chesky said in a previous interview, from the original Airbnb apartment on Rausch Street in San Francisco where the idea for the company was born in 2007.

Over the past 13 years, Airbnb has completely revolutionized the travel market, given people an income opportunity, and created a whole new market for real estate and guest services.

The company’s IPO plans were put on hold in March as the pandemic came to a halt around the world. In April, room bookings and experiences had fallen 72%. Airbnb has a comprehensive refund policy in place and distributed over $ 1 billion in cancellation fees.

In June, however, things were starting to improve. City dwellers who were fed up with being stuck inside their homes got into their cars and drove to mountain towns and rural communities, often settling for weeks or months at a time, as allowed by work-from-home policies.

Domestic boost

International travel was down, but demand for domestic and short-haul travel and stays outside the top 20 cities held up.

In the third quarter, Airbnb revenue fell only 18%, compared to nearly 60% for Expedia and Marriott International Inc. The three-month period was also the most profitable on record for Airbnb after adjusting earnings before interest, taxes, depreciation and amortization.

For the first nine months of 2020, Airbnb recorded a net loss of US $ 697 million on revenue of US $ 2.5 billion, compared to a net loss of US $ 323 million on revenue of US $ 3.7 billion. in US dollars for the same period last year, according to its documents. .

Reid Hoffman, of Airbnb’s first investor Greylock Partners, gave the company’s leadership credit for guiding the company through the pandemic crisis. It involved making tough decisions to reimburse guests while providing partial payments to hosts, even though it had the painful consequence of laying off 25% of his employees, he said.

“Today, Airbnb is flourishing, and when effective vaccines become widely available, it will no doubt adapt to these new circumstances as well,” said Hoffman.

Control of founders

Airbnb’s four share classes give holders of its class B – with 20 votes each to one for the class A shares sold on the IPO – control of the company.

Chesky, along with co-founders Nathan Blecharczyk and Joseph Gebbia, will own 42.9% of the company’s voting rights, according to his documents. Sequoia Capital will own 16.4% of the voting rights, according to the documents.

Another early investor in Airbnb and DoorDash, Ron Conway, singled out the current market enthusiasm and valuations of the bubble era two decades ago.

“It’s not like the last bubble where you had two-year-old companies with no income that got a market cap of US $ 20 billion,” Conway said. “You have companies that are 10 years old with very significant income.”

–With help from Patrick Clark and Lu Wang.

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