Initial Valuation
Updated 6:40pm EST
Airbnb is set to go public on NASDAQ Thursday, December 10th, 2020, with the ticker ABNB.
As of Tuesday, the share price has been raised and is now in the $67-$68 per share range, up from the previous $56 to $60 range, which was already up from the initial $44 to $50 price originally. With the new range, Airbnb would receive a fully diluted market value of $47 billion and is now planning on selling 52.9 million shares.
Prior to the pandemic, the company was valued at more than $40 billion, however at the 2020 low, the valuation fell to less than $20 million. But now Wall Street seems to be pricing the company at an even higher valuation than its previous pre-pandemic highs. For the first three quarter of 2020, with travel restrictions, Airbnb’s revenue dropped to 3.4 billion, but for 2022 the projections is a large rebound in revenue with sales increasing to $6 billion.
Worth getting in on IPO?
While initially there may have been an attractive discount due to the pandemic on the Airbnb IPO price for long term investors, the price now reflects an optimistic, forward looking valuation. Still, the planned offering market cap places them in line with the current market cap of Marriott, currently with a 43 billion market cap. And for investors with a long term time horizon, a continued strong execution could offers a lot more growth than investing in a legacy hotel operator. Airbnb is a staple of the “sharing economy” and often compared to Uber in its business model - however, unlike Uber which has struggled with a model that is unprofitable, Airbnb has shown it’s been able to have profitable quarters. After deep cuts and layoffs in 2020, Airbnb did post a profit in Q3 2020 - something Uber has never been able to do.
To fully understand the sharing economy, the vision and history of Airbnb we recommend the readers read “The Upstarts” by Brad Stone. Not only is it informative, it’s very entertaining and one of the best reads on Silicon Valley.
If investors can get their hands on ABNB under $75, this may be an opportunity worth considering for investors with a long time horizon, who won’t be put off by near term volatility.
This site references only our opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.