- Airbnb has more than doubled its valuation in a single trading session to over $US100 billion as its stock price soars on debut.
- Australians represented a good chunk of investors, with local trading platform Stake calling the trading spike the largest it had seen surrounding an IPO.
- Looking ahead, analysts say there are “significant risks” to the company’s performance, but – if the vaccine rollout is successful and growth remains strong – there is also a lot of potential.
- Visit Business Insider Australia’s homepage for more stories.
In the midst of incredible volatility, Airbnb’s initial public offering (IPO) has lured in hordes of investors looking to get in on day one.
The online rental marketplace’s stock price more than doubled to hit $US144 ($191) per share in its first day listed on the Nasdaq.
Its global footprint and broad familiarity appeared to stir interest amongst investors around the world as its valuation ballooned beyond $US100 billion.
In Australia, the appetite was palpable, with Australian trading platform Stake seeing a “massive” trading spike.
“We’ve seen huge interest in Airbnb so far on the platform. About 1% of our traders have already traded the stock and have put almost $US5 million through it,” global head of marketing Bryan Wilmot told Business Insider Australia.
Comparing it to the IPO of food delivery service DoorDash earlier this week, Wilmot said Airbnb had attracted 10 times the trading volume, and six times what the parent company of rival Booking.com had received all year.
“It was a monster IPO, comfortably the biggest one we’ve seen,” Wilmot said, suggesting it’d be high on the most traded stocks this month behind the likes of market favourite Tesla.
CEO Matt Leibowitz said it was no wonder given that Australians use the service they use more than 98% of those on the ASX.
“Airbnb is a game-changing company and the huge interest in trading its IPO shows the desire Australians have to get access to high growth companies from the ground up. And the US is where these companies are being born,” Leibowitz said.
Rival broker CMC Markets saw similar demand, attributing it to a “very buoyant US stock market and the pent up demand for travel and tourism”.
“Airbnb fits neatly into that space and the business IPO’d at a good time for investors to take advantage of future growth,” Ashley Glover, the Asia-Pacific head of sales trading, told Business Insider Australia.
“Trading activity was heavy during the first hour of trade as investors took advantage of the opening spike to realise some big profits. Trade then picked up into the close as investors took advantage of the lower prices toward the end of the session.”
A ‘turbulent ride’ ahead for Airbnb
But while there’s clearly huge initial momentum behind the company, analysts have concerns over its trajectory from here.
For one, its fortunes are tied to a return to normal travel and a lifting of restrictions on movement.
While vaccine hopes have helped lift global markets, question marks remain over how quickly and how successful their rollout will be.
“It’s expected that the global vaccination will take time and COVID-19 may still weigh heavily for the company,” eToro market analyst Josh Gilbert said.
Meanwhile the company faces a number of other “significant” risks to its lofty valuation, according to Warwick Business School professor John Colley.
“Airbnb still makes substantial losses after 12 years and was effectively rescued from COVID in April 2020 with $US2 billion from private equity. It also faces competition from Booking.com, Expedia, Google and a host of others in an increasingly congested marketplace,” Colley said.
“Future growth is likely to be narrow margin, so shareholders may well be in for a turbulent ride.”
But despite those challenges, Gilbert notes investors are being attracted to a stock which holds “a lot of potential”.
“Airbnb owns no real estate, which means they can keep costs low and continue to develop and expand the business. Its revenue in the third quarter was the second-largest ever by the company, and recovered much faster than other businesses in their sector. If they can deliver that in the middle of a pandemic, its sales growth for 2021 looks bright.”
It’s this later vision that investors appear to be buying for right now.