Airbnb Valuation Soars to Nearly $100bn in the Biggest U.S. Flotation of 2020

Airbnb's stunning market debut makes it the biggest US flotation of the year, arriving just a week after the biggest M&A deal of 2020 (S&P Global's $44bn merger with IHS Markit). Airbnb's valuation soared past $100bn, with shares doubling on Thursday, beating the 80% rise that food delivery company DoorDash achieved in its own debut just a day earlier.

Airbnb has done well to resurrect the deflated $18bn valuation it received earlier in the year, at a time when the pandemic had a crippling impact on the sector. The shares opened at $146, far above the initial public offering price of $68 it agreed on Wednesday, and more than 3 times the $44-$50 range the company gave last week. The shares also hit an intraday high of $165, surging 142.6%. Airbnb ended the day ever so slightly lower at $144.7, raising at least $3.4bn, in one of the most anticipated IPOs of the year.

Airbnb Share Price

Source: FactSet

The IPO is the culmination of a soaring market for new tech stock listings and a stunning recovery in the home-sharing company's fortunes, reflecting Airbnb's ability to navigate the coronavirus-induced downturn in travel. The trends were also in Airbnb's favour. Out of the 21 tech IPOs we have seen come to market that priced above their range, 20 of them have seen a large pop on their first day of trading.

Furthermore, the crossover between tech and hospitality for Airbnb almost creates the perfect scenario for a public listing. This is because investors have flocked to coronavirus-resilient sectors like tech and healthcare, providing strong demand and appeal for the stock. Airbnb is also in the hospitality sector, which many believe will see a strong rebound in the near term, encouraged by the positive vaccine news. Overall, while the environment is currently right, it is yet to be seen whether the valuations for these tech companies are justified.

Looking back a few months

Airbnb, the online rental marketplace, planned to go public via a direct listing during early 2020 but the pandemic's catastrophic impact on the travel industry quickly halted those plans. As a result of the coronavirus disruption, Airbnb raised $2bn in emergency debt financing, let go of about 25% of its workforce and reportedly lost 90% of its bookings. However, as lockdowns eased, more travellers opted to book homes instead of hotels, helping Airbnb post a surprise profit in Q3. The San Francisco-based firm also gained from increased interest in renting homes away from major cities. Following the bounce back, it was announced and confirmed in August that Airbnb resumed its IPO plans and confidentially filed for an initial public offering.

In early September Airbnb also rejected Bill Ackman's SPAC merger proposal. One reason Ackman likely sought after Airbnb is because of its, at the time, derailed valuation of $18bn, down from the $31bn valuation it received in a 2017 funding round.

IPO Record

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

There is also more to come. Other consumer-facing web-based companies set to go public this month include video-game company Roblox, fintech firm Affirm and online discount retailer Wish. These listings will add to what is already a record year for IPOs, with more than $167bn raised on U.S. exchanges.