Airbnb prices shares well above range as IPO frenzy continues

Airbnb has priced its initial public offering of stock at $68 per share, significantly above its target range, in a sign of investor confidence in both Airbnb’s home-sharing business and the long-term recovery of the travel industry.

The price, confirmed by two people briefed on the matter, means the short-term rental company has raised $3.4 billion from the offering, ahead of its Nasdaq debut Thursday. It had earlier said it expected its shares to be priced between $56 and $60 each.

The higher-than-expected pricing follows a strong debut for DoorDash, the food delivery company, which enjoyed a first-day pop of about 85% on Wednesday, hitting a market capitalization of $60 billion.

At its offer price, Airbnb’s implied market capitalization of $40.6 billion would be greater than that of rival travel booker Expedia — $18.2 billion — but still dwarfed by Booking.com, currently valued at $86.3 billion.

Airbnb declined to comment on the pricing.

The high demand for its IPO caps a sharp turnaround for the San Francisco-based company, which at the depths of the COVID-19 disruption in May was forced to raise $2 billion in emergency funding as bookings dropped more than 70% globally.

Against its competitors, Airbnb’s revenue and bookings took a comparatively less severe hit from the pandemic. In this year’s third quarter, the company returned to a $219-million profit, having incurred a $576-million loss in the previous quarter.

The rebound reflected domestic travel, particularly by customers who chose to work remotely in Airbnb accommodations for a month or more, but also the effect of drastic cost cutting. The company pulled back from businesses outside its core home-sharing offering, suspended almost all marketing, and shed a quarter of its staff.

The company has warned, however, that the reinstatement of lockdowns will lead to a challenging end to the year. Data from Edison Trends suggest that U.S. spending on Airbnb has fallen by about one-third since early October.

“Even though [Airbnb has] obviously been hurt by the pandemic, as has all travel, it stands to really get most of the early tail winds as people start coming out of hiding,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

Brian Chesky, Airbnb’s chief executive, will hold a stake worth $5.2 billion at the IPO price. He and co-founders Joe Gebbia and Nathan Blecharczyk will retain 42.2% of the voting rights in the public company. The founders were due to sell 1,551,723 shares in the offering, amounting to about $106 million at the IPO price, on top of the $3.4 billion raised by the company.

The pricing also potentially reflects a lack of concern that the company’s prospects would be hindered by regulation. Restrictions on short-term rentals had been imposed in about 70% of Airbnb’s top 200 cities, the company stated in its prospectus, but said it was not concerned about any material impact to its biggest cities from regulation in future.

In its filing, Airbnb said that 3.5 million shares — as much as 7% of the total offering — would be made available to hosts, prioritizing those who had been on the platform for longer if the offer was oversubscribed.

Morgan Stanley and Goldman Sachs are lead underwriters on the IPO.

© The Financial Times Ltd. 2020. All rights reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied or modified in any way.