Airbnb Tops $100 Billion on First Day of Trading,
Reviving Talk of a Bubble
The home-rental company’s blockbuster I.P.O. followed
that of the delivery company DoorDash. Investors piled into both.
Erin
Griffith
By Erin
Griffith
Dec. 10,
2020
Updated
2:57 p.m. ET
SAN
FRANCISCO — Over the last decade, Airbnb has upended the travel industry, riled
regulators, frustrated local communities and created a mini-economy of
short-term rental operators, all while spinning a warm narrative of belonging
and connection.
On
Thursday, Airbnb sold investors on an even unlikelier story: that it is a
pandemic winner.
The
company’s shares skyrocketed on their first day of trading, opening at $146
each, 115 percent above its initial public offering price of $68. That put
Airbnb’s market capitalization at $101.6 billion — the largest in its
generation of “unicorn” companies and more than Expedia Group and Marriott
International combined.
The
blockbuster offering came a day after DoorDash, a food delivery start-up, also
defied gravity on its first day of trading by surging 86 percent to a valuation
of $68 billion. Both follow a string of other hot I.P.O.s that together make
2020 the busiest year for U.S. public offerings since 1999, according to
Renaissance Capital, which tracks I.P.O.s.
The
hair-bending offerings this week have raised talk of a new stock market bubble
in the midst of a pandemic-induced downturn, as more than 947,000 workers filed
new claims for state unemployment benefits last week. With interest rates low
and fiscal stimulus goosing parts of the economy, investors have chased
ever-riskier bets, driving valuations of unprofitable start-ups to levels that
seem divorced from reality. Robinhood, a stock trading app that has seen usage
spike in the pandemic, has also flooded the market with millions of day traders
eager to get a piece of brand-name tech companies.
“There
obviously is a tremendous amount of enthusiasm,” said Scott Kessler, an analyst
at the research firm Third Bridge. “It’s just hard to really feel comfortable
and confident about valuation levels.”
The
exuberance is a sharp turnaround from last year, when a lackluster I.P.O. from
the ride-hailing giant Uber and a failed I.P.O. attempt from the office company
WeWork humbled the tech industry, leading to caution and layoffs at the
beginning of 2020. The dismay intensified with the onset of the pandemic, with
many start-ups cutting back in anticipation of a slowdown.
But over
the summer, the tech industry surged and the stock market came roaring back. A
wave of tech I.P.O.s delivered gushers of cash to Silicon Valley start-ups,
their investors, founders and employees. Airbnb’s valuation now tops Uber and
approaches the level of Facebook at its I.P.O. in 2012. Later this month, the
e-commerce start-up Wish, the game maker Roblox and the home-buying company
OpenDoor also plan to go public.
Unlike the
other start-ups, which have seen demand for their products soar in the
pandemic, Airbnb spent most of the year reeling as people canceled their
bookings. In the first nine months of the year, Airbnb brought in $2.5 billion
in revenue, down from $3.7 billion a year earlier. It lost $697 million during
that time, more than double last year.
In April,
it raised emergency funding, closed certain side projects and shelved its
I.P.O. plans. In May, the company laid off a quarter of its roughly 7,600
workers.
To convince
investors it belonged in the same category as “Covid-winners,” Airbnb’s
offering prospectus presented a grand vision. The financial document featured
magazine-style spreads of guests and renters in beautiful settings. It argued
that it had invented a new kind of travel while also providing economic
stimulus, a cure for loneliness and spreading “healthy tourism.” And it
unfurled a well-worn underdog narrative of resilience and redemption.
A letter
signed by Airbnb’s three founders — Brian Chesky, the chief executive, and Joe
Gebbia and Nathan Blecharzyk — included talking points Mr. Chesky has repeated
in numerous interviews praising the clarity the crisis had given him. The
company emphasized that its home rentals could cater to travelers taking road
trips outside of cities and that its bookings began rebounding two months into
the pandemic. The prospectus even argued that the pandemic had accelerated Mr.
Chesky’s bold prediction that people would someday “live anywhere.”
Those
messages resonated with investors. “People are interested in the name, not the
financials,” said James Gellert, chief executive of Rapid Ratings, a provider
of financial analysis. “This is a company that is going in the wrong direction
today, from a financial strength perspective.”
The
pandemic was especially difficult for Airbnb because it has largely had a
rocket-ship trajectory that made it the toast of Silicon Valley. The company
was founded in 2008 as a way to let people rent out an extra room and quickly
expanded to a network of seven million home rentals around the world.
Airbnb
embodies the last decade of highly valued start-ups that used gig work,
smartphones and piles of venture capital to upend old industries, grow fast,
put off going public and worry about profits later. Its rapid rise brought the
idea of vacation homes — and tourists — into city apartments and residential
neighborhoods. Its founders pitched messages of trust, community and living
like a local.
“When we
reflect back on meeting Brian, Joe and Nate, it was just their ability to tell
a story of a world that is very different than what exists,” said Alfred Lin,
an investor at Sequoia Capital and member of Airbnb’s board.
Along the
way, Airbnb has faced regulations and stricter rules for home rentals. The
company has grappled with safety concerns over parties thrown at its rentals,
guests who trashed their places, fraudulent listings, hidden cameras and hosts
who racially discriminated against guests.
Those
challenges have persisted as business has returned in the pandemic. Parties
have proliferated and neighbors to Airbnb listings have become more vocal in
their complaints. Hosts have become angry with the company for overriding their
cancellation policies during the pandemic. Cities have begun to explore
stricter regulations.
Airbnb
acknowledged those risks in its offering prospectus while emphasizing its
ability to adapt in the face of disaster.
“There are
not that many companies that can stare down the abyss of a global pandemic,
where international travel is shut down, and figure out their way out of that,”
Mr. Lin said.
Erin
Griffith reports on technology start-ups and venture capital from the San
Francisco bureau. Before joining The Times she was a senior writer at Wired and
Fortune. @eringriffith
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