Airbnb IPO will get treated better by the market than before the pandemic as competition gets ‘handicapped’ by crisis, Prof Damodaran says

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  • Airbnb got the “timing right” in its IPO, Professor Aswath Damodaran told Bloomberg.
  • Damodaran said Airbnb may even get a higher price than before the pandemic, because its brick-and-mortar competitors have been crushed by crisis. 
  • He said that the market is doing “really well right now” for “companies with low capital intensity companies with Airbnb’s business model.”
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The coronavirus pandemic may be good for Airbnb’s initial public offering price, according to Professor Aswath Damodaran. 

The NYU Stern School of Business professor told Bloomberg on Thursday that Airbnb could “get to the top end of their range” in the IPO, in part because the company’s brick-and-mortar competition has been severely “handicapped” by the coronavirus crisis.  

Damodaran, who’s commonly referred to as the “Dean of Valuation” said that the market is doing “really well right now” for “companies with low capital intensity — companies with Airbnb’s business model.”

From this perspective, although Airbnb’s “basic economics” looks worse than pre-pandemic levels, the company may get higher pricing now, Damodaran said. The market is treating companies like Airbnb better than they did a year ago, he added, and Airbnb “got the timing right.”

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Airbnb’s brick-and mortar competition, however, is not faring as well, he said. “You look at Marriott, Hilton, I mean these companies are going to come out of this crisis a lot more damaged than Airbnb ever will,” Damodaran said. “So in a strange way these capital-light companies are being rewarded because their competition is being so badly punished by this crisis.”

“Airbnb is doing the right thing in terms of going public,” said Damodaran. The San Francisco-based company confidentially filed for an IPO on Wednesday.  

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