Following spectacular first days of trading following their high profile IPOs, the share price of both p2p short term rentals platform Airbnb and app-based gig-economy takeaway delivery service Doordash have taken a beaten. With Airbnb’s market value having soared by over 100%, and Doordash’s by over 70% on their first days of trading, it was perhaps inevitable that there would be a slide.
There was always the feeling that small retail investors piling into the stocks in fear of missing out on the next big tech success story had driven both companies into immediate ‘bubble’ territory. The IPOs had mainly been open only to institutional investors, so the first opportunity for small investors was when the stocks started trading on the open market.
UK-based stock broking platforms commented on the huge rush of demand for the stocks last week, and that is a pattern that was presumably replicated in the USA to an even greater extent.
By the end of its first day of trading, Airbnb’s valuation exceeded $100 billion, making it worth more than the combined value 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.
However, public markets have since pushed back against that valuation and the Airbnb shares price was yesterday down by as much as 24% from its Thursday intraday peak. Doordash was down 22% on its Wednesday high, having debuted on Wall Street the day before.
Both companies look to have a bright future as part of the digital economy. But it was hard to see how Doordash, which is still loss-making despite being the world’s largest meal delivery service, and Airbnb, which has suffered a terrible 2020 as a result of the Covid-19 pandemic were worth what their stock price charts said last week.
Yesterday several well-respected analysts downgraded their outlook on the stock of both companies, telling investors they could not possibly justify their current price tags. That appears to have taken the wind out of the two companies’ sales, with investors rushing to take profits.
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