Airbnb valuation skyrockets to $100bn amid IPO “bonanza”

US: After much speculation and anticipation, Airbnb has achieved an eye-watering post-initial public offering [IPO] valuation of circa US$100 billion, marking a huge rise from the $47 billion at the IPO offering price and the $42 billion figure that was initially forecasted earlier this week.

The home-sharing platform is raising around $3.5 billion in the process, and shares in the company soared 127 per cent as high as $146 [when Airbnb opened on the Nasdaq index] and then $154, another significant upshot from the $68 figure that shares were immediately priced at for the IPO. Investors are believed to be selling close to 52 million shares, according to sources close to the matter speaking to Bloomberg.

In the middle of that spike, Airbnb has become the largest-ever firm to double its value on the first day of public trading. It will also trigger some fears that an exuberant market is pushing valuations of tech companies too high during an intense month of quick-fire IPOs.

The float ensures that Airbnb’s co-founders, CEO Brian Chesky, and executives Joe Gebbia and Nathan Blecharczyk, will all become multi-billionaires and have stakes worth over $10 billion.

The suggested $100 billion figure, which reportedly includes employee stock options and restricted stock units, rounds off a remarkable fightback from Airbnb, having recorded losses of $700 million in the first nine months of this year and seen the majority of its business decimated at the nadir of the Covid-19 pandemic.

Though previously resistant to the idea of taking Airbnb public, CEO Brian Chesky only began to firm up plans for an IPO last September and the platform was touted to begin the process in March, before the pandemic took hold on the world.

Airbnb’s resurgence is in stark contrast to the situation in March and April, when the company faced a sizeable backlash from hosts and guests alike over its perceived abruptness in cancelling bookings and performing a high-profile U-turn over its extenuating cancellation booking policy. CEO Brian Chesky pledged to pay out $250 million in cancellations back to hosts and lay on a $10 million Super Host relief fund, allowing previous guests to help out hosts with a personal note or financial contribution, and lobbying the US Government to provide short-term rental hosts with small business loans and grants.

In April, the embattled firm needed to raise $2 billion in two separate tranches of emergency funding to continue operating. The first $1 billion round was made up of debt and equity securities while the second was a $1 billion loan in senior debt, with private equity firms such as Silver Lake and Sixth Street Partners leading the investment.

In doing so, the firm was forced to lower its internal valuation from $31 billion to $26 billion, and later to as low as $18 billion.

Meanwhile, bookings in May showed a 70 per cent decline in bookings from the same month a year earlier. CNN’s business correspondent Chris Isidore predicted around that time that the coronavirus outbreak would have as seismic a shock for the travel industry as 9/11 did post-September 2001.

The coronavirus ramifications on Airbnb were further highlighted in June when the company made the decision to trim its workforce by 25 per cent in a measure to urgently cut costs, as well as to halt all expenditure on marketing and new hirings.

Over the summer, though, Airbnb saw a striking rebound in domestic reservations as city dwellers experiencing ‘cabin fever’ sought out vacations in remote, drive-to destinations to escape Covid hotspots, resulting in longer-term average stays as the trend for ‘working from anywhere’ took off. The platform also reported its most profitable three-month period of all time, since launching 12 years ago, based on earnings before interest, taxes, depreciation and amortisation.

This rebound culminated with Airbnb beginning the filing process for its IPO in August.

24 hours prior to Airbnb’s public float, America food delivery firm DoorDash confirmed its IPO listing price had almost doubled on its debut trading session to around $71 billion, with company shares soon jumping by 86 per cent. Japanese tech corporation SoftBank, which has invested $680 million in the business over the last three years, saw the value of its 25 per cent stake in the company surge to $11.9 billion on the first day of public trading.

Even before Airbnb’s stock market debut, the past 12 months have already proved to be a record year for IPOs with more than $163 billion already raised in US exchange IPOs. DoorDash and Airbnb are also set to propel this month’s IPO volume to a record-high, exceeding the $8.3 billion milestone achieved in December 2001 and 2003.

Airbnb and DoorDash’s listings will trigger an end-of-year IPO splurge, including firms such as Peloton bikes holding company Affirm Holdings, video game company Roblox, and ContextLogic, the parent firm of discount online retailer Wish.

According to high-profile CNBC anchor Jim Cramer, Airbnb “is set to have a terrific year starting next March” and post substantial growth when the company makes its public debut.

Morgan Stanley and Goldman Sachs are leading Airbnb’s IPO. The company’s shares will begin trading on the Nasdaq Global Select Market under the symbol ABNB at 14:30 GMT later today [Thursday].

In reaction to the Airbnb IPO announcement, Jetstream CEO Mike Liverton said: “The IPO is great news for the industry. It highlights the breadth of the types of guests that are now looking to short-term rentals for all kinds of stays that combine living, travel and work.

“It’s also another catalyst to increase the opportunities for properties that have the potential for multi-use including long-, mid- and short-term stays bringing greater opportunity for these asset owners to partner with tech platforms and operate new flexible business models in the hospitality market,” he added.

Jeremy Gall, CEO and founder of Breezeway, said: “Airbnb’s IPO is a milestone for the vacation rental industry, and its awareness should continue to accelerate trends within hospitality. Airbnb has faced challenges to identify listings that align with consumers’ growing demand for quality.

“In attempts to mitigate this, the company has created several luxury programmes [leveraging segments of ‘Superhosts’ with stellar reviews and service] to create collections of high-quality homes with predictable amenities and services that move the private accommodation experience closer to that of a hotel travel experience. This continued push for quality is indicative of how hospitality operators will professionalise their inventory and operations in the coming years,” he added.

Jared Alster, co-founder and chief strategy officer at Wildebeest, said: “I would expect Airbnb to come back to earth a little over the course of the next few days – the valuation was already on the high side! It is a mix of overall exuberance in terms of stock market and the amount of tech companies going public in a short amount of time, all during a pandemic.

“Airbnb has a great brand story overall, and clearly investors are not spooked too much by the overall downward pressures on travel right now. With vaccines coming up, all they see is upside,” he added.

Andrew Bate, CEO and founder of Safely.com, said: “The Airbnb IPO excitement establishes the potential for the the short-term rental industry. Airbnb claims a serviceable addressable market of $1.2 trillion, or over 111 billion nights – which would make hotel stays the “alternative” accommodation of the coming decade.
“To meet these ambitious targets, Airbnb needs more homes which requires that homeowners trust the reservation process and the internet strangers who show up at the front door,” he added.

Join International Hospitality Media editor-in-chief George Sell, along with Andrew McConnell [Rented.com CEO], Katherine Doggrell [Questex Hospitality Group editor-in-chief] and Sascha Hausmann [partner at HOWZAT ennea Group],  for a special webinar this coming Friday 11 December at 14:00 GMT to dissect the Airbnb IPO and its impact on hospitality globally. Sign up to the session at this link.