The latest company to join the season of initial public offering, Airbnb, made its debut on Thursday recording more than its targeted share price to raise about $3.5 billion.
In an unprecedented manner, the shares soared in the stock market on Thursday, valuing the home rental firm at $101.6 billion in the biggest U.S. flotation of 2020.
Shares opened at $146 on the Nasdaq, far above the initial public offering (IPO) price of $68 apiece that raised $3.5 billion for the company. The stock hit a high of $165, rising 142.6% after the debut.
Airbnb’s IPO came just hours after DoorDash debuted on the New York Stock Exchange with $3.37 billion offering, beating expectations.
The duo has enjoyed significant growth in business following a demand surge that yielded a rebound from the pandemic-fueled slump.
The company’s offering is led by Morgan Stanley and Goldman Sachs group Inc. and its shares are expected to begin trading Thursday on the Nasdaq Global Select Market under the symbol ABNB.
But the jolly ride propelled by the pandemic has limitations that may undermine Airbnb’s valuation. Bloomberg noted that for the company to hang on to any lofty valuation, it will need to grapple with a litany of threats, as outlined in its IPO prospectus, ranging from a surge in party houses that carry liability risks to an increase in professionally run properties that lack the charm that made Airbnb rental famous.
Bloomberg analysis divided the factors that drove Airbnb’s growth into two: the pandemic crush and the domestic boost.
The pandemic crush stems from a bounce back in domestic bookings since the outbreak of coronavirus plummeted demand for house rentals.
The analysis noted how in the past 13 years, the San Francisco-based company has upended the travel market, given people an opportunity for income and created a whole new market for services related to real estate and hosts. The ingenuity has placed Airbnb in the high spot of the travel industry.
Airbnb planned its IPO in early April, but was immobilized by the outbreak of the pandemic which saw its shares dive 72%. The company rolled out a blanket refund policy and gave out more than $51 billion in cancellation fees.
The rebound that reinforced the IPO started in June as city dwellers began moving to mountain areas to fight off boredom that ensued following the lockdown. Many of the travelers settled for as long as a month, working from home and adapting to virtual life.
Domestic boost according to the analysis stemmed from a surge in short distance trips and stays outside of the top 20 cities as an alternative to international travel.
The rebound became noticeable in the third quarter, when Airbnb recorded only 18% decline compared to other companies like Expedia group Inc. and Marriott International Inc. who recorded 60% decline respectively.
Bloomberg said Q3 was also the most profitable period ever for Airbnb, based on earnings before interest, taxes, depreciation and amortization.
In the first nine months of 2020, Airbnb had a net loss of $697 million on revenue of $2.5 billion, compared with a net loss of $323 million on revenue of 43.7 billion for the same period in 2019, the filing statement said.
Airbnb funding in April put its valuation to $18 billion, indicating huge loss as it falls well below the $26 billion it cited as internal valuation in early March.
Airbnb revolutionized the hotel industry since it was founded in 2008. The company allows individuals to rent out rooms in their homes for travelers and get paid accordingly. The startup thus became one of the most innovative and lucrative ideas in the hotel industry, reaching at one point in its early stage, $31 billion in valuation.