Airbnb’s (ABNB) stock opened for trading on the Nasdaq at $146 per share on Thursday, jumping sharply above its initial public offering price as traders snapped up shares of the newly public company.
At this pricing, Airbnb fully diluted valuation was more than $100 billion, surging from its last private valuation of $18 billion this past spring.
A day earlier, the company raised $3.5 billion in its initial public offering, after selling more than 50 million shares at $68 apiece.
Heading into its public debut, demand for Airbnb’s shares kept marching higher. Earlier this week, the San Francisco-based company said it planned to market shares at between $56 and $60 apiece to raise as much as $3.1 billion on a $42 billion valuation. That range was in turn raised from $44 to $50 per share earlier in December, in a testament to the increasing demand for the company’s stock.
Airbnb’s first day of trading comes a day after DoorDash’s, which also went public with an upsized IPO. DoorDash’s market capitalization at the end of its first day of trading was more than $60 billion, after last being valued at $16 billion in private markets earlier this year.
Given the exuberance, some analysts issued words of caution to investors looking to immediately buy into the frenzy surrounding these new companies.
“My view on the hot IPO is you do nothing out of the gate,” Heritage Capital President Paul Schatz told Yahoo Finance. “Unless you’ve got friends and family shares, you sit back and you watch, and there’s a three to six month period where the vast majority… have that initial kick and they spend 3-6 months in volatile territory but on balance going significantly lower.”
‘Still a compelling story’
As with many travel companies, Airbnb has been hit hard this year by the coronavirus pandemic. The home-rental software platform saw revenue drop 32% to $2.5 billion during the first nine months of this year versus 2019, though its top line decline improved to 18% in the third quarter specifically. Its net losses also more than doubled to $697 million over the first nine months of this year.
Amid these concerns, the company raised $2 billion in debt financing earlier this year, and laid off about 1,900 workers, or 25% of its workforce. And it hinted at an uncertain post-virus future in its prospectus, noting that, “Even after shelter-in-place orders and travel advisories are lifted, demand for our offerings, particularly those related to cross-border travel, may remain depressed for a significant length of time, and we cannot predict if and when demand will return to pre-COVID-19 levels.”
At the same time, a some analysts suggested Airbnb’s struggles this year forced it to become a leaner company better equipped to hit the public markets.
Airbnb “has shown that they’ve been able to right the ship during a very difficult period. They’ve raised debt and done layoffs, they really homed in on the core part of their business,” EquityZen’s Brianne Lynch told Yahoo Finance. “And what they’re selling to investors is, the best is yet to come when travel returns, so I think there’s still a compelling story for them.”
“I would say that the pandemic has forced them to really become more disciplined and maybe grow into a public market-type company, and they took all the steps to do that, and they were very disciplined in that path,” she added. “They’re painting this narrative of fiscal responsibility and I think that’s something that will resonate more with investors.”
Plus, the company had been growing strongly leading up to the pandemic. Its revenue jumped by more than 30% year-over-year in fiscal 2019 to $4.8 billion, and its gross booking value — or the total amount paid by customers including fees — increased 29% to $38 billion.
And Airbnb still maintains a large base of hosts who offer their homes on the platforms, and guests who seek out lodging and experiences. The company boasts 4 million hosts globally, with 86% of those based outside of the U.S. Hosts span more than 220 countries and regions and about 100,000 cities. And last year, 54 million global active users booked 327 million nights and experiences through Airbnb.
Airbnb makes its public debut during a year when traders have been particularly amenable to newly public companies, with equity traders largely looking through lingering COVID-19 concerns and ahead to next year’s expected sustained economic reopening. Prospects for mass vaccine distribution in the coming months have propelled the broader market to record highs, with cyclical stocks including airlines and cruise lines being especially boosted. These companies’ businesses, like Airbnb’s, are closely tethered to re-openings and a return of travel demand.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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