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Is a $35 Billion Valuation Fair for Airbnb's IPO?

In an amended filing with the U.S. Securities and Exchange Commission (SEC) Tuesday, Airbnb announced a price range of $44 to $50 per Class A share for an initial public offering (IPO) of 50 million shares. Selling shareholders are selling 1.9 million of those shares, and the underwriters of the IPO have a 30-day option on another 5 million shares.

Airbnb expects net proceeds of around $2.3 billion, assuming a per share IPO price of $47. Each dollar above or below that level would add or subtract $48.9 million from the proceeds to the company.

Including 400,000 shares of Class A stock the company plans to donate to a charitable foundation, Airbnb’s valuation at $50 a share totals nearly $35 billion.

According to Crunchbase, Airbnb has raised $6.4 billion in venture funding through June of 2020. At the time, the company was valued at around $18 billion, far below its $31 billion valuation in 2017.

In its November 16 SEC filing, Airbnb estimated its serviceable addressable market to be $1.5 trillion, including $1.2 trillion for short-term stays and $239 billion for experiences. The firm also estimated the total addressable market to be $3.4 trillion, including $1.8 trillion for short-term stays, $210 billion for long-term stays and $1.4 trillion for experiences.

Airbnb reported revenues of $2.56 billion, $3.65 billion and $4.81 billion for 2017, 2018 and 2019, respectively. During that time, the company posted net losses of $70.05 million, $16.86 million and $674.34 million, respectively.

In the third quarter of this year, the company reported net income of $219 million on revenue of $1.34 billion, a decline of around 19% year over year, but a solid recovery from sharp drops related to the COVID-19 pandemic. Gross booking value has risen from a year-over-year decline of 64% in April to a gain of 35% in September.

Getting an IPO done right now makes a lot of sense. There’s a lot of cash sloshing around in the market, just looking for a home. Airbnb has plenty of those.

As for that $35 billion valuation, IPO investors undoubtedly will validate it. What happens to the shares over the next month or so is more likely to tell the full story on valuation.