As global equity markets are on track for their best monthly gains in more than decade, DoorDash and Airbnb are developing new strategies for launching their initial public offerings. As the American economy craters thanks to COVID-19, more than $140 billion has been raised in 383 IPOs, exceeding the previous full-year record high set during the peak of the dot-com boom in 1999, according to data from Dealogic stretching back to the mid-90s.
And just last week, the S&P 500 notched its 26th record close of the year, while the Dow vaulted above the 30,000 mark for the first time last week.
With such promising market conditions, why shouldn't these companies try to squeeze a few billion dollars more out of their offerings.
Airbnb is planning to target a range of around $30 billion to $33 billion - using a fully diluted share count—when the home-rental startup kicks off its investor roadshow Tuesday, according to people familiar with the matter. That is greater than $30 billion people close to the offering had expected.
DoorDash, meanwhile, plans to target a range of around $25 billion to $28 billion on a fully diluted basis ahead of a roadshow expected to begin Monday. That is greater than the $25 billion people close to the offering had expected.
Typically, companies and their underwriters seek to set relatively conservative IPO ranges, but as WeWork demonstrated back in 2019, that strategy has been abandoned in favor of an aggressive cash grab. Both Airbnb and DoorDash are expected to list in mid-December, which could give markets a nice year-end boost, or perhaps catalyze a crash.
Both companies have successfully survived the pandemic; Airbnb is celebrated for its innovative moves to try and target users looking for longer-term stays in more suburban or even rural areas. A $33 billion valuation would be nearly 2x the $18 billion valuation kicked around during the worst of the pandemic, when market analysts feared the worst might not yet be over.
CEO Brian Chesky swiftly moved to borrow $2 billion while slashing the marketing spend, laying off a quarter of the company’s staff and putting many non-core projects on hold. Bookings at Airbnb rebounded by summer, though they're still nowhere close to pre-pandemic levels.
DoorDash's situation is a little different. While the company saw a surge in orders during the pandemic, it still heavily subsidizes each meal delivered with some of its remaining venture capital. In its prospectus, DoorDash warned that it might never be profitable.
