Jada Taglione

YesterdayJan 18 at 7:58pm
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IPO offering in 2020:

AirBnB (ABNB)
IPO date: Dec 10th, 2020
The initial price: $68 per share
The stock price at the end of the first day of trading: $144.71 per share
The stock price at the end of 10 days of trading: $154.84
The stock price at the end of 30 days of trading: $169.27
 
The total amount of the offering: $86.5 billion (double its valuation it sought in the IPO 1
day prior)
The number of shares offered: 51,323,531 shares of Class A common stock (50 mil from
Airbnb, 1.3 mil from current shareholders)
The underwriter: Co-leads Morgan Stanley and Goldman Sachs
The fees for the IPO: $370,188 registration fee and $1.4416 per share
 
This was a very successful IPO launch for AirBnb. There was much hype around it the
weeks and days before the launch but launching at the end of a pandemic year after
travel and tourism had declined considerably was questionable to investors. Their first
valuation during their IPO underwriting was promising Morgan Stanley 17,600,478
shares, Goldman Sachs 12,397,276 shares, and other investment companies the
remaining at only $47 per share (SEC, 2020). This was eventually raised to $68 per share
and announced the day before the launch. This would have yielded a valuation of $47
billion. However, it opened at $146 a share and closing the day at $144, ultimately
earning the company a valuation of $86.5 bil (Feiner, 2020). This market cap surpasses
that of hotel chains like Marriot and Hilton which hold caps of $42 bil and $29 bil,
respectively (Feiner, 2020). The first day surge also made Airbnb the 10 th best debut in
2020 (Feiner, 2020). Investors also profited with a 30 day jump to $169 per share.
Though the underwriters did not end up acquiring the 50 mil shares, they did earn
$1.4416 per share totaling $74 million (SEC, 2020).
References:
Feiner, L. (2020, December 10). Airbnb skyrockets 112% in public market debut, giving it a
market cap of $86.5 billion. CNBC. Retrieved
from https://www.cnbc.com/2020/12/10/airbnb-ipo-abnb-starts-trading-on-the-
nasdaq.html
SEC. (2020, December 11). Form 424(b)4: AirBnb. Retrieved
from https://sec.report/Document/0001193125-20-315318/#toc81668_20
Yahoo! Finance. (2022, January 18). AirBnb Inc. (ABNB). Retrieved
from https://finance.yahoo.com/quote/ABNB/
Brandon Stevens
4:47amJan 19 at 4:47am
Manage Discussion Entry
Brandon Stevens
BUS 629: Financial Forecasting and Budgeting
Week 4 Discussion 2
 
Compare the advantages and disadvantages of using a Dutch Auction to a traditional
underwriting method for an IPO.
             The Dutch Auction method differs greatly from the traditional methods of
underwriting an IPO. “A Dutch auction is a market structure in which the price of
something offered is determined after taking in all bids to arrive at the highest price at
which the total offering can be sold. In this type of auction, investors place a bid for the
amount they are willing to buy in terms of quantity and price” (Chen, 2021, para 2).
Essentially, the price in which has the highest number of bidders is then selected as the
offering price, not necessarily the highest or lowest price. One of the key advantages to
this type of system is that it opens up the bidding to smaller firms and investors instead
of only to larger investors. Traditional IPO offerings are primarily handled by investment
banks who then become responsible for as underwriters which allow them to purchase
securities at a major discount. Another benefit is that it is much more transparent and
often results in fairer prices versus the traditional method. The major drawback to this
method however is that of experience. In the traditional method, investment banks often
do plenty of research and can be counted on for their purchase. Since the Dutch Auction
method allows smaller firms to participate, they may be inexperienced and as a result,
may miscalculate their bids and therefore may sell the stock to remove themselves from
the purchase which crashes the stock’s value.
Identify one real-life IPO that occurred in 2020.
Initial Price: $68
Price at end of first day: $144.25
Price at end of 10 days: $154.84
Price at end of 30 days: $151.39
Total Amount Offered: $3.5 billion
Number of Shares: 51.5 million
Underwriter: Morgan Stanley, Goldman Sachs
Fees for the IPO: $105 million
 
Evaluate the success of this IPO from the perspective of the issuer; the underwriter,
and investors.
            When Airbnb went public, they underestimated just how high the demand would
be and therefore made a very smart move shifting from the private sector where they
debuted their stock at $68. “It was a far higher price than the company had originally set,
indicating investor demand for the stock. Airbnb had initially put its price range at $44 to
$50 a share, and on Monday it had raised that to $56 to $60 each” (Griffith, 2020, para
2). This was a huge win for the company as the COVID pandemic has reduced their
valuation to from $31 billion to $18 billion due to travel restrictions. The Underwriter
also saw major success as they took on a company who was trending downwards and
instead saw their value sky rocket through public investor interest. In most cases, the
Underwriter inherits a large amount of risk depending on the type of market/firm and
this was no different however Airbnb’s performance proved them right. Investors also
won in this move as they saw the value of their shares increase quickly. While in the
beginning, they may have been upset that the initial price increased from $44 to $68,
Airbnb is currently at $154.18 as of January 19 th 2022 so they have also seen a major
increase. Overall, everyone involved in this IPO has benefited.
             
References
Chen, J. (2021, December 30). Dutch auction definition. Investopedia. Retrieved January
19, 2022, from https://www.investopedia.com/terms/d/dutchauction.asp
Griffith, E. (2020, December 10). Airbnb prices i.p.o. at $68 a share, for a $47 billion
valuation. The New York Times. Retrieved January 19, 2022,
from https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price.html