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Airbnb Shares More Than Double in Market Debut


Airbnb Inc.’s

ABNB 116.90%

shares more than doubled in their debut on Thursday, reflecting a soaring market for new stock listings and the home-sharing company’s ability to navigate the coronavirus-induced downturn in travel this year.

The stock began trading at $146 on the Nasdaq Stock Market, higher than its initial-public-offering price of $68 a share.

The opening trade valued Airbnb at $101.6 billion, higher than its IPO valuation of roughly $47 billion, based on a fully diluted share count and proceeds from the offering. Based on the stock’s debut, the company is worth more than

Marriott International Inc.,

Hilton Worldwide Holdings Inc.

and

Hyatt Hotels Corp.

combined.

More recently, the stock traded at $150.

Co-founded in 2008 by now-Chief Executive

Brian Chesky,

Airbnb changed the hospitality industry by demonstrating that millions of people were willing to skip hotel stays and book spaces offered by hosts on its platform. The company says it has built a powerful brand for short-term rentals, reporting that both hosts and guests find their way to the Airbnb-booking platform organically.

As of the end of September, the company had more than 7 million active listings of homes and experiences, such as guided activities, in more than 220 places globally, according to a prospectus about the IPO.

Airbnb’s listing caps a difficult year that saw the company whipsawed by a sharp decline in travel caused by the spread of Covid-19. The pandemic upended vacations and work-related trips, forcing Airbnb and other companies—including airlines, hotel chains and cruise operators—to retrench.

This spring, as consumers sheltered in place, Airbnb borrowed $2 billion to shore up its cash reserves. In May, the company said it would cut 1,900 jobs, or a quarter of its staff, and pause investments in noncore operations. Airbnb slashed other big expenses, including for marketing.

“I did not know that I would make 10 years’ worth of decisions in 10 weeks,” Mr. Chesky said in an October interview.

But the company was able to latch on to demand from people looking for trips closer to home during the pandemic, fueled by consumers wanting a change of location. In August, for example, more than half of bookings made through Airbnb were for stays within 300 miles of the guest’s location. Revenue is nowhere close to pre-pandemic levels—down 32% year-over-year in the first nine months of the year—but has still recovered from lows in the spring.

The health crisis forced the company, which had spent big in recent years, to rein in costs and return to its home-sharing roots, Mr. Chesky has said.

The company’s costs had jumped fivefold between 2015 and 2019, as it expanded into new areas such as media and transportation, built a new headquarters and aggressively invested in sales and marketing. Mr. Chesky said he ran through hundreds of expense items “line by line” during the pandemic. Total costs dropped 22% in the first nine months of the year compared with the year-earlier period. The company’s hefty sales and marketing budget was cut by more than half.

The unforeseen pickup in local stays, combined with deep cost cuts, led the company to post a profit in the third quarter of this year. The June-September quarter is typically strong for the platform because of seasonal factors including summer vacations, and Airbnb has turned a profit in that period since 2018.

But like many Silicon Valley startups that are bleeding red ink when they go public, Airbnb has never posted a full-year profit. Its loss last year was greater than its losses in the previous four years combined. And it lost more than twice as much through the first nine months of this year than it did in the year-earlier period, largely because of shrinking revenue earlier in the health crisis.

Airbnb’s debut comes a day after

DoorDash’s

shares jumped 86% on their first day of trading, a gain that came on top of increases in the share price during the run-up to the offering. Likewise, Airbnb’s stock price also has risen ahead of its IPO. Last week, the company had been targeting $44 to $50 a share, but boosted that to $56 to $60 before landing at its final, higher number.

The company’s growth in recent years has drawn sharp opposition from many corners. Many homeowners have been pushing to combat Airbnb, raising objections to living near short-term rentals because of noise, parties and worries about property values. In its stock-offering prospectus, the San Francisco company notes that landlords, neighborhood groups and condominium associations have moved to prohibit or restrict home sharing.

Denver, Boston and other cities have issued rules covering short-term rental operations, as have cities that before the pandemic were major tourist destinations, including Rome and Barcelona. Meanwhile, some mayors have said that investors have purchased homes to rent out through Airbnb, exacerbating housing shortages and affordability. Airbnb said in its prospectus that it will continue “to collaborate with policymakers to implement sensible legislation in cities around the world.”

Organized-labor groups tied to hotels also have fought the company. In New York, for example, a major hotel-employee union had put together a lobbying effort to try to curtail the company. Airbnb earlier this year said it would hire union construction workers for new-real estate projects where it is involved.

Airbnb was bleeding cash earlier this year, making its plans to go public by the end of 2020 look bleak. But by adapting its business to the pandemic, Airbnb looks to have salvaged its IPO and possibly its future. Photo illustration: Jacob Reynolds/WSJ

Write to Micah Maidenberg at micah.maidenberg@wsj.com, Preetika Rana at preetika.rana@wsj.com and Maureen Farrell at maureen.farrell@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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