Breakingviews - Airbnb IPO surge puts pressure on next unicorns

The Airbnb logo is seen on a little mini pyramid under the glass Pyramid of the Louvre museum in Paris, France, March 12, 2019. REUTERS/Charles Platiau

SAN FRANCISCO (Reuters Breakingviews) - The unicorns next door have a lot to live up to after Airbnb’s initial public offering. Shares of the home-sharing app more than doubled on Thursday, beating the 80% rise of food-delivery firm DoorDash in its own debut a day earlier. Airbnb has some rare traits compared to other frothy offerings, but investors and other billion-dollar-plus issuers are likely to see its runaway performance as a new norm.

With an $87 billion valuation based on its first traded price of $146 per share, Airbnb is more than twice the size of hotelier Marriott International, and a shade larger than Booking Holdings, owner of Priceline and Kayak. That’s a bittersweet triumph. Brian Chesky’s firm raised $3.4 billion in its stock market debut. At the actual price at which the shares traded, the same slug of new Airbnb shares would have been worth around $7.3 billion.

It’s a marked difference from last year. The parent of office-sharing service WeWork pulled its IPO in 2019 because public investors bridled at its high valuation twinned with large losses. Ride-hailing Uber Technologies’ stock opened 7% lower than its IPO price of $45 a share in 2019.

Airbnb has something they don’t: a solid business model, even after a tough year. Its revenue fell by 32% for the first nine months this year, compared to a 52% fall for Booking. Brian Chesky’s firm slashed costs by more than 20% and laid off 1,900 employees in that period, allowing it to post earnings of $219 million in the third quarter. After this week, it also has around $8.4 billion of cash.

Chesky has now thrown down the gauntlet for others. Grocery delivery service Instacart is expected to go public next year, as is brokerage app Robinhood. An IPO isn’t their only option – there are also direct listings and so-called special purpose acquisition vehicles to choose from. But if they want to start with a bang – even if that means leaving billions on the table – Airbnb and DoorDash have set the bar high.


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