🔥 Hottest IPO Of Them All?

Airbnb boosts its IPO target price seeking a $42 Bn valuation now

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Friday Close) 3,699.12 +32.40 (0.88%)

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USDINR (5 PM IST) 73.91 (1 Year +4.14%)

Hottest IPO Of Them All?

In a year that has seen a record-high $140B being raised through IPOs, Airbnb is leaving little consumer surplus on the table. In other words, it’s going for the highest range of valuation to rake in the moolah.

Background: During the pandemic, people were uncomfortable staying in hotels when traveling. They preferred private homes for their sojourns. That trend played right into Airbnb’s hands. The company reported an after-tax profit of $219M in Q3 compared to a loss of $576M in Q2. Global presence, asset-light business, strong market position, and brand make it an all the more exciting business for investors.

In its 12-year existence, the company has amassed 5.6M listings in 100K cities in 220 countries and regions, including 3,500 castles, 2,600 tree-houses, and 140 igloos. More than 50% of revenues come from outside the US. Millennials account for a bulk of its business, and the average daily rate is around $130 a night.

All this essentially means the company is poised for ever higher growth as the world extricates itself from the pandemic’s grip. By some estimates that the company might be worth as much as $100B in a couple of years, or $150 per share.

What Happened? The pandemic made Airbnb focus more on managing its costs. Sales and marketing expenses are down by $1B (on an annualized basis). That makes the company leaner, and growth-ready. Airbnb is the classic reopening play – with demand expected to surge as consumer and business travel revive post-pandemic. This optimism means there’s scope for the IPO valuation to push the limits.

Airbnb was expected to price its offering at $30B. With the company filing for an anticipated price range of $44 to $50, Airbnb’s target valuation, using its fully-diluted share count, at the top end was coming in at $33B. Well, the company has now decided to boost the range to between $56 and $60 a share, which pushes the valuation to as much as $42B on a fully-diluted basis.

The fact that there’s ample demand even at this high valuation, shows investor appetite is unsatiated, especially when it’s a compelling story. All this will ensure the US IPO market continues to sprint forth to a climactic end for the year.

Market Reaction: Even at $56-$60 price per share, ABNB is expected to outperform investor expectations. Airbnb shares will be available on Winvesta shortly after the company debuts on Wall Street on Thursday, December 10th.

IPO Snapshot 📈

ABNB
Expected Price: $56-60
Expected Valuation: $42 Bn
IPO Date: Dec 10, 2020

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