The giddy reception to the Airbnb IPO was exciting to watch, but it has downsides that go beyond leaving money on the table.
The home-rental platform’s stock price peaked at $165 during its trading debut at a premium of 143 percent.
The elevated price levels after the first day of trading will likely mean more volatility going forward, which could distract management and employees from doing their jobs. Also, it becomes more difficult to hire new talent as stock-option grants are set at frothy levels.
When one considers that Airbnb recorded more than $1 billion in losses over the past year and negative free cash flow in excess of $1.2 billion, and that analysts are forecasting continued cash burn through 2021, Airbnb’s future may be brighter than its present.
Indeed, stock prices have crashed 24% since, reminding us of the heady but skewed optimism of the dotcom days. Perhaps, pragmatism is in order.