Digital rental services company Airbnb Inc. (NASDAQ: ABNB) has completed its initial public offering (IPO) and raised $3.7 billion in the process. Despite delaying its IPO earlier this year, the company decided to push ahead in the final quarter, citing a growing demand for its service and resiliency shown during the Coronavirus Pandemic.
Here’s what investors need to know about the stock market’s newest listing.
Turnaround for Company During Pandemic
According to Airbnb co-founder and CEO Brian Chesky, the company was preparing to launch its IPO in March. However, Chesky says that “When borders closed and travel stopped, our business declined by nearly 80%. I don’t think many people expected us to go public this year. I know some people questioned if we’d make it at all.”
While the early days of the pandemic were rocky for the company, it quickly recovered as global lockdown restrictions were eased. It generated a $219 million surprise profit in the third quarter, thanks to aggressive cost cuts and renewed demand for accommodation bookings.
The stock will soon be available to trade on the public market. The IPO generated $3.7 billion for the company with shares priced at $68.
What to Know About the Company Before Investing
Jumping into this stock right after the IPO is risky, and most investors would do better to see how the price moves after the first few weeks of trading.
Airbnb operates a digital platform for private accommodation bookings. Users can book rentals, temporary lodgings, tours, and similar services. Service providers and property owners that list on the platform pay a commission to Airbnb. It’s essentially a marketplace that connects service providers with customers, and that is entirely focused on vacation rentals and tourism/adventure activities.
Airbnb is popular because it offers more competitive rates compared to traditional motel and hotel listings. The platform also offers unconventional lodgings that wouldn’t otherwise be available, thanks to the peer-to-peer nature of the marketplace.
For anyone planning to invest in this stock, it’s important to know that the company isn’t consistently profitable. The surprise profit in the third quarter will at least give some confidence that the business is moving in the right direction.
Is it a Strong Stock to Invest In?
IPOs always carry some risk. Airbnb is an innovative company with few competitors. It’s essentially the Uber of the accommodation market. It has a strong brand and has recently learned how to manage costs and turn a profit. This stock could be valuable in the long term, and it’s worth a cautious investment for anyone who is interested in the tourism industry or digital service economy.
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