Airbnb shares surge on opening day’s trade, as Wall Street’s IPO euphoria continues

The first day of trade for home rental company Airbnb has gone off with a bang. After listing its initial public offering at US$68, the company’s share price surged 113% in Wall Street trade overnight, to close cash trading at US$144.71 per share. The company currently has a total market capitalization of US$86.5 billion.

Airbnb’s extraordinary launch into public markets extends the trend of extraordinary buying activity for newly floated companies on Wall Street this year. Despite the Covid-19 crisis, and a relatively high volatility environment, highly accommodative financial conditions have seen new floats thrive, with American food delivery company DoorDash floating a day earlier, and recording a similar surge in its share price in its first day of trade.

Questions about the companies current fundamentals have been asked by sceptics of Airbnb’s rally, who’ve diminished it as a reflection of a euphoric market driven by retail investor speculation. However, there remains a strong fundamental thesis for investing in Airbnb amongst market participants. The company is seen as a disruptor to traditional holiday accommodation, with a far more flexible and resilient business model, that’s manage to weather the Covid-19 crisis better than its competitors.

How Airbnb navigates its new life as a publicly listed company will be the core interest for the market now, as the mania of its IPO fades. A lot will depend in the short-term on how the global economy normalizes and recovers from the Covid-19 crisis, as restrictions on domestic and international travel across the world continue to inhibit the profitability of companies sensitive to travel and tourism.