by Rick Ackerman
RickAckerman.com
Here was a reassuring headline last week from Forbes online: Airbnb’s Higher Valuation Is Reasonable. What a relief! We can always count on the financial news media to provide a list of reasons why a stock is not overvalued no matter what its price. The trouble is, the story appeared before ABNB went public last Thursday. The IPO had been pegged at $56-$60 per share, amounting to a valuation of around $35 billion. However, when the stock actually began to trade, it opened at $146 and rose in minutes to $165. That’s a valuation of more than $100 billion – not bad for a business that has been drowning in red ink since the pandemic hit last spring and which even before then was challenged to bring any revenues down to the bottom line. “The new valuation,” continued Forbes, referring to the $60/share benchmark, “changes nothing about the firm’s business but increases the execution risk of management achieving the expectations baked into the stock.”