The U.S. IPO market is booming this year. The IPO market passed the previous record, which was set in 1999 at the height of the dot-com boom. Apart from the number of issues and the total money raised, one more indicator of the strong IPO market has been the pricing. Many companies have bumped up their IPO price after the roadshows, which is a sign of strong investor demand. Reportedly, Airbnb plans to hike its IPO price. What will the new price be for the Airbnb IPO?
Snowflake boosted its IPO price twice before the listing. Snowflake is the biggest software IPO ever. The price hike didn't deter Berkshire Hathaway, led by legendary value investor Warren Buffett, from investing in the company. Airbnb plans to increase the pricing range for its IPO, according to The Wall Street Journal.
Airbnb's IPO price
Previously, Airbnb set its IPO price range between $44 and $50. According to The Wall Street Journal, citing those familiar with the pricing, Airbnb could increase the pricing range to $56–$60. The increase would mean a bump of 20 percent at the top end of the previous range and value Airbnb at up to $42 billion.
When is the Airbnb IPO?
Airbnb would list on Dec, 10. The company plans to raise over $3 billion from its IPO. DoorDash also expects to raise over $3 billion from its IPO. DoorDash hiked its IPO price. Previously, Airbnb shelved its IPO due to the COVID-19 pandemic. The company also announced layoffs as its revenues tumbled due to the lockdowns.
Companies have raised over $140 billion in the United States so far in 2020, making it the biggest year ever for IPOs, according to data from Dealogic.— Ajay Bagga (@Ajay_Bagga) December 7, 2020
DoorDash and Airbnb IPOs are set to mark a strong finish to a blockbuster year for new listings in the US .
Is the Airbnb IPO a good investment?
The Airbnb IPO looks like a good investment based on its asset-light business model and the popularity of its services among users. While the business model looks strong, the valuations don’t look too pricey either. In 2017, Airbnb commanded a valuation of $31 billion during fundraising.
At the most recent private fundraising in April, Airbnb had a valuation of $18 billion. While the indicative IPO valuation is thrice of that valuation, it should be seen in perspective. Stock market valuations, especially for companies in the travel and tourism space, fell in March and April. The funding round was a distress funding round for Airbnb. The valuations don't indicate the business fundamentals.
We could see pent-up holiday demand after a successful COVID-19 vaccine, which would be positive for all of the companies in the travel space including Airbnb. The IPO could deliver good returns to investors looking at the pricing and business fundamentals.
How to invest in the Airbnb IPO
To invest in the Airbnb IPO, you need to open a trading account with any of the brokers. You can fund the account and place the order for Airbnb shares. If you want exposure to a diversified basket of newly listed companies, you can consider the Renaissance IPO ETF. The ETF is outperforming the S&P 500 by a wide margin this year amid strong gains from IPOs in 2020.