What happened
Shares of Airbnb, Inc. (ABNB 0.75%) are soaring on the home rental vendor's first day on the public market. The stock jumped as much as 142.6% higher in the early going, settling down to a milder 119% gain as of 3:47 p.m. EST.
So what
Airbnb set its opening price at $68 per share, collecting $3.5 billion of cash from shareholders in the sale of 51.6 million shares. Most of the unicorn stock remains in the hands of insiders and early investors, so the stock's total market value at its opening price was approximately $47 billion.
Investors saw more value in Airbnb right from the start. At the time of writing, Airbnb's market cap works out to $103 billion.
Image source: Getty Images.
Now what
Some investors will call this a very good initial public offering (IPO) because the aforementioned insiders and pre-IPO investors made a lot of money today. On the other hand, Airbnb itself could clearly have collected a larger bag of cash reserves by setting the launch price closer to $145 per share. From that point of view, big first-day jumps can be seen as a bad outcome.
Either way, Airbnb will be volatile and closely watched for the foreseeable future. Many investors have been waiting for this moment for years and expect the company to shake up the lodging market in the long run, armed with a healthy cash infusion and the ability to negotiate buyouts structured around the company's stock-based value.
2020 has been a busy year for high-powered IPOs. Financial technology specialist Lemonade (LMND 1.64%) raised $319 million and has gained 44% in less than six months. Data warehousing rebel Snowflake (SNOW 3.69%) raised its IPO price twice before pulling the trigger, but the stock still doubled on the first day. Data analytics expert Palantir Technologies (PLTR 3.73%) raised $4.8 billion, closing the first day just below the launch price but roaring back to a return of 184% in three months.
Only time will tell how Airbnb's IPO will compare to its fellow unicorn stocks. For now, Airbnb's $47 billion market cap is comparable to Palantir's, smaller than Snowflake's, and much larger than Lemonade's.
