Airbnb share price more than doubles in spectacular post-IPO market debut
Crowd-sourced short term accommodation rentals business Airbnb yesterday enjoyed a quite phenomenal Wall Street debut that saw its share price more than double its IPO pricing. By the end of the day Airbnb was worth around $100 billion after gains of 112.8% for the day. Shares were trading $144.7, compared to the $68 they were sold to IPO investors for, raising $3.5 billion.
Within just 24 hours as a public company, Airbnb is now worth more than the combined valuations of Marriott ($43 billion), Hilton ($29 billion) and Intercontinental Hotels Group (£9 billion/$12 billion) – three of the world’s biggest and best-known international hotels groups.
Airbnb has spent the last decade ‘disrupting’ the traditional hotels market by providing a technology platform that lets homeowners and landlords offer their own properties, or even just a spare room, as an alternative to hotel accommodation. Airbnb makes its money by charging both guests and hosts a fee on bookings.
The unparalleled success of Airbnb’s market debut, and the almost as spectacular first day of trading for Doordash, another tech company, the day before, highlights the strength of investor appetite for scalable technology companies. Doordash, the USA’s biggest takeaway meals delivery service, saw its own share price gain 83% on Wednesday, though it did yesterday slide 1.9% to $186 million as some investors took out profits.
Airbnb’s highly successful IPO and maiden-day trading as a listed company brings a positive conclusion to a traumatic year for the company. It has suffered from an appalling 2020 thanks to the Covid-19 pandemic, with its business relying entirely on travel and tourism, which were wiped out for large swathes of the year. The company recorded a loss of $576 million over the quarter to the end of June and has reduced its employee numbers by 1800, or around 25%, this year, as well as raising $2 billion in emergency funding.
The third quarter, with many global lockdowns eased over the summer months bringing some respite to the tourism and travel industry, saw Airbnb return to a $219 million profit. But the fourth quarter, and quite probably the first of 2021, can again be expected to represent bleak reading from a revenues point of view.
However, investors clearly have faith in Airbnb’s ability to bounce back once pandemic conditions are dropped as vaccination programs roll out globally from the beginning of 2021. The company was founded in 2007 but it was in the aftermath of the 2008-09 crisis that it really established itself as a go-to for Millennial tourists and even business travellers. The company will again hope to come out of the current international economic crisis strongly.
Airbnb’s three co-founders, Brian Chesky, Joe Gebbia and Nathan Blecharczyk are all now paper billionaires with Mr Chesky retaining 15.4% of the company and Mr Gebbia and Mr Blecharczyk owning 14.2% each.
The Airbnb IPO had originally been planned for earlier in the year but was delayed when the pandemic hit in late February. Instead, the company quickly raised $2 billion in emergency funding to tide it over and cut costs, mainly through reducing its workforce.
One bright spot for the company has been domestic demand for rural properties, with city workers looking for somewhere comfortable to work from home with families during lockdown periods.
Another handful of digital economy-focused tech companies are due to list before the end of the year, including video game platform company Roblox and ecommerce group Contextlogic.
After hugely successful IPO’s and public market debuts, the challenge for Airbnb and Doordash will be to live up to the sky-high investors expectations that will now come along with their lofty valuations.
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