Airbnb valuation reaches $100 billion in trading debut surge

Airbnb Inc. shares more than doubled in their trading debut, propelling the home-rental company to about a $100-billion valuation and one of the biggest first-day rallies on record.

The shares closed Thursday at $144.71 up 113% from the $68 initial public offering price. The listing came 10 months after the COVID-19 pandemic upended travel and 24 hours after DoorDash Inc. soared in its public debut.

“I don’t know what else to say,” Airbnb Chief Executive Brian Chesky said in an earlier Bloomberg Television interview when told about the potential opening price. “I’m very humbled by it.”

Airbnb’s market value, based on its outstanding shares, makes it the world’s biggest online travel company. Its $86.5-billion market value narrowly tops Booking Holdings Inc.’s $86.2-billion market capitalization, and eclipses Expedia Group Inc. and TripAdvisor Inc.

Airbnb’s market value, about 19 or 20 times its 2021 revenue at the opening price Thursday, also topped that of the four largest public hotel chains combined.

San Francisco-based Airbnb’s fully diluted valuation is even higher, around $100 billion including employee stock options and restricted stock units.

Alfred Lin, a Sequoia Capital partner who sits on the boards of both Airbnb and DoorDash, said the last two days have been a blur. Strong investor demand shows investors recognize Airbnb’s potential, he said.

“We’ve seen how resilient this business model is, and we’ve seen the company stare into the abyss of a pandemic that shut down global travel and figure their way out of it,” Lin said.

DoorDash’s debut surge — elevating its fully diluted value to about $71 billion — played a role in Airbnb’s discussion about pricing its IPO above the marketed range, according to people familiar with the matter. An Airbnb representative declined to comment.

To hang on to its lofty valuation, Airbnb will need to grapple with a litany of threats, as outlined in its IPO prospectus, including a surge in party houses that carry liability risks, and an increase in professionally run properties that lack the charm that made Airbnb rentals famous.

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

There’s more to come. Other consumer-facing web-based companies set to go public this month include video-game company Roblox Corp., installment loans provider Affirm Holdings Inc. and ContextLogic Inc., the parent of online discount retailer Wish Inc. Those listings will add to what is already a record year for IPOs, with more than $166 billion raised on U.S. exchanges, including Airbnb and DoorDash, the data show.

Airbnb’s offering was led by Morgan Stanley and Goldman Sachs Group Inc. Its shares will trade on the Nasdaq Global Select Market under the symbol ABNB.

Airbnb has seen a bounce back in domestic bookings since the early days of the pandemic crushed demand.

“No year in our history has been as wild and crazy and defining as this year,” Chesky said in an earlier interview, from the apartment on Rausch Street in San Francisco where, in 2007, the idea for Airbnb was born.

In the last 13 years, Airbnb 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. Today, Airbnb is one of the biggest travel companies in the world.

The company’s IPO plans were put on hold in March as global travel ground to a halt with the pandemic. By April, room bookings and experiences had plunged 72%. Airbnb rolled out a blanket refund policy and doled out more than $1 billion in cancellation fees.

By June, though, things were starting to look up. City dwellers who were sick of being stuck inside their homes got in their cars and drove to mountain towns and rural communities, often setting up for weeks or months at a time as work-from-home policies allowed.

International travel was down, but demand for domestic, short-distance trips and stays outside of the top 20 cities proved resilient.

In the third quarter, Airbnb’s revenue declined only 18%, compared with the near 60% decline for Expedia Group Inc. and Marriott International Inc. The three-month period was also Airbnb’s most profitable ever, based on earnings before interest, taxes, depreciation and amortization.

For 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 $3.7 billion for the same period last year, according to its filings.

Airbnb survived the depths of the crisis by cutting marketing expenses and firing about a quarter of its staff in the spring.

“It’s been an unrelenting year,” Chesky said. “I feel like I’m 39 going on 59 because it feels like we had to make a couple of decade[s’ worth of] decisions over the last eight months.”

Airbnb’s four classes of stock give holders of its Class B — with 20 votes each compared with one each for the Class A shares sold in the IPO — control of the company.

Chesky, with co-founders Nathan Blecharczyk and Joseph Gebbia, will have 42.9% of the company’s voting power, according to its filings. Sequoia Capital will have 16.4% of the voting power, the filings show.

Another early investor in both Airbnb and DoorDash, Ron Conway, distinguished current market enthusiasm and valuations from the dot.com bubble era two decades ago.

“It’s not like the last bubble where you had companies that were two years old with no revenues getting a $20 billion market cap,” Conway said. “You have companies that are 10 years old with very significant revenues.”