Denver, Düsseldorf There hasn’t been so much euphoria for a long time. Airbnb’s shares rose 115 percent to $ 146 at the start of trading on Thursday on the Nasdaq. The online room broker was worth nearly $ 102 billion, more than rivals Marriott and Expedia combined.
Due to the high demand, Airbnb had already increased the supply range for its shares to $ 56 to $ 60. The issue price was then even 68 dollars.
Last but not least, investors should be pleased with the jump in the price of the company’s debut: Sequoia, the Founders Fund by Peter Thiel, Silver Lake and Sixth Street are among the largest venture capital funds. The German investor Klaus Hommels is also one of the early donors.
This made Airbnb the largest US IPO of the year. The online room broker raised $ 3.5 billion from investors and came to an issue price of $ 47 billion. The US data company held the previous record for 2020 Snowflake, which had a valuation of $ 33.2 billion when it first listed in September.
In the course of the day, however, the share lost some of its momentum. Based on the issue price of $ 68, it was still 112 percent up. But only professional investors got allocations at this price. Retail investors entering at $ 146 or more exited trading at slight losses. The closing price was $ 144.71.
New discussion about a tech bubble
A price jump of more than 100 percent at the start of trading is unusually high. Especially because Airbnb and the investment bankers from Morgan Stanley and Goldman Sachs tried to keep the so-called “pop” as low as possible.
As on Wednesday with Doordash’s IPO, the strategy did not work out. Investor demand was just too high. The shares of the largest US food company rose to $ 195.49, nearly doubling their issue price of $ 102. On Thursday, the Doordash papers were around two percent in the red after profit-taking.
On Wall Street, the euphoria in the market has sparked a new discussion about a tech bubble. David Trainer from the New Constructs analysts thinks the papers are overpriced. Doordash was the “most ridiculous IPO of the year,” he made clear.
Bay Crest Partners’ Jonathan Krinsky does not speak of a large bubble, but of “quite a bit of foam”. The courses are also driven by the high demand from small investors, who are driving demand upwards on free trading platforms such as Robinhood. Airbnb is a global brand, but many buyers do not know what risks they are loading into their portfolios.
Investor Hommels, on the other hand, believes in the long-term success of the room rental company despite the high valuations. “The rating today is relatively irrelevant. It is important that Airbnb is still successful in five to seven years. And that’s what I assume, “said Hommels in an interview with the Handelsblatt. Hommels, founder of Swiss venture capitalist Lakestar, joined Airbnb in 2011 as a private investor and plans to hold his stake.
Although Airbnb is also affected by the corona crisis, it has successfully shifted its focus from subletting private apartments in large cities to holiday apartments. “We had to focus strongly this year,” said CEO Brian Chesky before the start of trading on the stock exchange channel CNBC.
He sees himself well positioned for the future. “Travel will never be like it was in January again, because the world will never be like it was in January again,” believes the 39-year-old. Instead of mass tourism, customers would focus more on individual trips and experiences.
Co-founder and Chief Technology Officer Nate Blecharczyk also sees his company as well positioned for a second wave of corona. “The pandemic has proven the resilience and adaptability of our business model,” he said in an interview with Handelsblatt. “Our business model heals itself.”
Airbnb’s business has recovered
Hommels praises Chesky’s ability as a crisis manager. “He has proven that again this year, and as an investor I am convinced that he will also be able to solve future problems well.”
The analysts at Wolfe Research also see many advantages of the start-up. The company does not act as a landlord itself, but takes an average of 15 percent commission for every booking made via the platform. That keeps the cost of capital low.
Most recently, business has recovered somewhat from the crisis in the spring. In the third quarter, Airbnb was even able to show black numbers: In the past quarter, the company earned $ 219 million (185 million euros). In the nine months to the end of September, however, there were total losses of just under $ 697 million.
“Investors like stocks in companies that are showing strong growth,” says Sven Weber, who advises the venture capital fund Knightsbridge Advisers. He points out that, as in 2008, the technology industry was particularly resilient during the crisis. That goes down well with investors.
Chesky and his team now have to meet the high expectations. The situation could deteriorate again in the coming months. “The high number of corona cases and the new travel restrictions will probably also be reflected in the numbers from Airbnb,” warns Daniel Morgan from asset manager Synovus.
More: Risks, entry opportunities, growth – what investors need to know about Airbnb’s IPO.