Interactive Investor

Airbnb prices its festive IPO at $30bn

2nd December 2020 13:48

Graeme Evans from interactive investor

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Investors have less than two weeks to wait until Airbnb shares are available to buy.

Another red-hot year for Wall Street IPOs is finishing with a flourish after home rentals business Airbnb priced its pre-Christmas float with a potential valuation of up to US$30 billion.

The San Francisco-based company will now embark on an investor roadshow ahead of an expected Nasdaq stock market debut on 10 December under the symbol “ABNB”.

Meal delivery company DoorDash is also expected to join the party after confirming on Monday it is planning a listing that could the value the business at as much as $27 billion (£20.2 billion).

In contrast to London, where IPO activity has been tepid in the face of Covid-19 and Brexit, the US market is enjoying another bumper year for IPOs. Dealogic reported that the $140 billion (£105 billion) raised so far by companies in 2020 was the biggest yet.

The resilience of FAANG stocks during the pandemic has provided a favourable backdrop for the newcomers, with cloud data specialist Snowflake and business intelligence platform ZoomInfo Technologies among those doubling in value since making their debuts.

Joe Biden's election victory and the recent Covid-19 vaccine breakthroughs have added to the momentum for IPOs towards the end of the year. 

Airbnb filed documents on Tuesday in which it said its initial public offering price would be between $44 and $50 (£33-£37.50), which at the top end of range gives a market value of $29.8 billion (£22.3 billion). When including options and restricted stock, this rises to $34.8 billion (£26.1 billion).

Based on the company's plans to offer 50 million shares in the IPO, the move could raise as much as $2.85 billion (£2.1 billion). This includes $100 million (£75 million) for founders Brian Chesky, Joe Gebbia and Nathan Blecharczyk.

The pre-Christmas IPO represents a swift turnaround in fortunes for Airbnb after the company was forced to cut its full-time headcount by 25% in May and suspend marketing spend in response to global travel restrictions.

Revenues were 18% lower at $1.34 billion (£1.01 billion) in the three months to 30 September, but actions taken earlier in the year have enabled the company to post a net profit of $219 million (£165.4 million).

One factor helping the company during the pandemic has been the trend for travellers to favour staying in private homes rather than hotels.

In the IPO prospectus, the founders wrote: “When borders closed and travel stopped, our business declined by nearly 80%.

“We had to put our IPO on hold, and I don’t think many people expected us to go public this year. I know some people questioned if we’d make it at all. What has transpired since then has been our most defining period since we started Airbnb.”

Like most of Wall Street's tech newcomers, Airbnb has yet to make an annual profit and does not expect to do so in the current year. It has also warned prospective investors about the threat of a potential $1.35 billion (£1.02 billion) tax bill relating to the sale of intellectual property.

Your guide to buying Airbnb shares with ii

Early investment in Airbnb is not available to UK retail investors but you will be able to buy shares through ii on the first day they start trading. 

Here are the steps you can take in advance to be ready for day 1:

1.    Open an account

You will be able to hold shares in our Trading Account, SIPP, ISA and Junior ISA.

2.    Complete the exchange agreements

You need to complete this form before you make your first international trade. We will prompt you to complete the agreements the first time you search for an international share price.

3.    Complete a United States dealing (W-8) form

Before you can buy US-listed shares you need to have completed a W-8 form. You can find the form, and instructions for sending it back to us, on our Useful Forms page. You don't need to do this if you are only investing in a SIPP.

On the day shares are admitted there will be an initial period of price stabilisation, after which trading commences. This may only be a few minutes but can take a few hours, as was the case with Alibaba (NYSE:BABA) when it floated in 2014.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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