The IPO market is booming, or bubbling if you prefer. Doordash, a modern-day courier service, and Airbnb both came public last week. Doordash rose 87% from its IPO price and Airbnb was up 113%. Airbnb is now worth more than the combined value of Marriott, Hyatt, and Hilton. Below is a succinct summary of everything you need to know about today’s IPO market. Frothy conditions in the IPO market should be viewed as a caution flag. The WSJ reports:
The valuations of the newly public companies are dwarfing older rivals. Airbnb is worth more than Marriott International Inc., Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. combined, by market capitalization. It is worth about the same as online travel giant Booking Holdings Inc., a slower-growth company that had more than double Airbnb’s revenue in the 12 months through September and had a $1.3 billion profit. DoorDash is worth nearly double fast-food operator Yum Brands Inc., the owner of Pizza Hut, Taco Bell and KFC.
The enthusiasm extends further than buzzy companies known well to consumers. Business-software companies have been in particularly high demand. Software company Snowflake Inc., which went public in September, is worth more than 200 times the $489 million in revenue it made in the 12 months through October. Data-analysis firm Palantir Technologies Inc., which went public in September at a roughly $21 billion valuation, is now worth $50 billion, or 50 times its revenue.
At least three electric-vehicle companies valued at over $2 billion have gone public this year with no revenue, while numerous other tiny companies with large private valuations in the electric-vehicle sector are planning public listings.
Meeting the high expectations of stock-market investors could prove difficult. While a few standouts like Amazon.com Inc. and Alphabet Inc.’s Google have shown an ability to keep expanding quickly at large scale, most companies are unable to maintain the soaring growth rates of their early years as they mature and get bigger.
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