Airbnb soars 112% in public market debut

Airbnb, the American vacation rental online marketplace company, saw its shares skyrocketed 112% at the open of its IPO debut, giving a market valuation of USD86.5 billion, more than double the valuation the company sought in the IPO just a day ago.

Founded in 2008 as Airbed & Breakfast, Airbnb disrupted the hotel industry by popularising the once unthinkable idea of renting out rooms in the homes of strangers. Its platform is used to find and book accommodations in 220 countries and regions around the world.

Shares of Airbnb initial public offering at USD68 showed a massive pop when it opened trading at USD146 per share. The first-day surge made Airbnb the 10th best debut in 2020 based on price gain from its IPO.

That makes Airbnb more valuable than the seven largest US hotel chains combined, including Marriott, Hilton, and Hyatt. Marriott International is worth USD41 billion, Hilton Worldwide is worth USD29 billion, and Hyatt is worth USD7 billion.

It also puts the home-sharing service company past the market cap of travel giant Booking, which has a valuation of more than USD86 billion and competitor Expedia which has a market cap of more than USD18 billion.

The company is going public at a time . Its revenue shrank nearly 19% last quarter to USD1.34 billion compared with the same period a year prior. But it still managed to turn a profit of USD219 million and has had other intermittent quarters of profitability.

In a 2017 private funding round, the company was valued as high as USD31 billion . The steep cut to Airbnb’s valuation in April came when the sector has been battered by reduced-travel trends during the public health crisis.

But the company bounced back quickly, as travellers wanted little interaction with people during their travels and flocked to private residences on Airbnb over hotel stays that required interactions with workers and other tourists.

In an interview with CNBC, Brian Chesky, CEO of Airbnb, said the platform is considering the changed ways travellers are looking to plan their trips now that remote work is a possibility for many. Now that people are coming to Airbnb, they don’t even necessarily have a destination in mind or dates, because they’re flexible.

Now we’re going to be getting a little bit more into the game of inspiration and matching people to the perfect home experience for them, he told CNBC. Chesky also said he isn’t too concerned about valuation.

As part of its IPO, Airbnb has created an endowment fund for hosts consisting of 9.2 million nonvoting shares it set aside. Airbnb said in its IPO prospectus the fund would benefit hosts through programs and grants.

According to the company, they want hosts to share in their success, not merely for a single moment in time, but for as long as Airbnb exists in the world. “We intend the Host Endowment Fund to be a long-term investment in the future of our host community, to be shaped by hosts for hosts,” the company wrote.