Airbnb, DoorDash lead 'unicorn parade' ending hot IPO year

Airbnb and DoorDash make their stock market debut this week as part of a “unicorn parade” capping a busy year for hot startups going public.

The startups known as unicorns — valued in the billions — are poised to take advantage of a market hungry for young businesses promising fast growth, with some taking advantage of lifestyle changes due to the coronavirus pandemic.

This week’s big initial public offerings include food-delivery service DoorDash, which has seen a surge during COVID-19 restrictions, to be followed by home-sharing platform Airbnb and e-commerce operation Wish.

Firms going public with lofty valuations, some in the tens of billions of dollars, have been concentrated in technology, such as big data analytics group Palantir and cloud storage firm Snowflake earlier this year.

There have been 420 IPOs on US markets so far this year, some 88 percent more than at this point a year earlier, according to StockAnalysis.com.

Companies have raised some US$144.8 billion overall going public in the United States this year, the most in the past 25 years, according to Dealogic.

“You are seeing some of the strongest tech companies of the last five to seven years go public, like Palantir,” Wedbush analyst Dan Ives said. “It has definitely been a strong year for IPOs.”

Startups are tapping into a prime time to raise money while their business models look promising and the market is eager for opportunities, according to analysts.

“It is a case of striking while the iron is hot, because there is going to be a market correction,” said analyst Rob Enderle of Enderle group. “You want to do an IPO and get your money before that happens.”

DoorDash is aiming high with an opening share price of US$102, valuing the food delivery startup at US$38.7 billion overall for its stock market debut yesterday, according to US media reports.

DoorDash would be valued at US$32.4 billion based on outstanding common stock alone, not adding in private stakes being held by insiders.

That is still more than double the US$16 billion that San Francisco-based DoorDash was deemed worth during a private funding round in June.

Renaissance Capital said of the DoorDash IPO that the “December unicorn IPO parade begins.”

Some analysts are skeptical of the latest round of IPOs at current valuations.

Investment research firm New Constructs CEO David Trainer warned investors about the DoorDash market debut, branding it “ridiculous.”

Trainer argued that the DoorDash offering “holds no value... beyond bailing out private investors before unsuspecting public investors realize the business is not viable in its current form.”

Airbnb, on the other had, which has seen its business crushed along with the rest of the travel industry, promises to be a better bet once people around the world return to vacationing and adventures, according to New Constructs.

The vacation rental platform, expected to hit the market today, has fared better than travel industry peers with its home-sharing platform offering more appeal during the pandemic.