Welcome DoorDash and Airbnb, the $ 100 billion duo

(Bloomberg Opinion) – The market for technology IPOs continues to grow. This month he is on track to set an all-time record for money raised through initial offerings in the United States, culminating what has already been a record year, with companies attracting $ 156 billion from investors, according to data compiled from Bloomberg.

This week brings a double whammy: First, there’s food delivery leader DoorDash Inc., which traded Tuesday night at $ 102 a share, above an already rising price range. The stock then opened to trade at $ 182 on Wednesday, nearly 80% more than its IPO price, giving the company a valuation of around $ 68 billion. Airbnb also increased its initial public offering range and may fetch a higher amount when it trades Wednesday night, enough to give DoorDash and Airbnb a combined valuation of more than $ 100 billion on a fully diluted basis. Investors can also look forward to the public market debut soon of virtual world gaming platform Roblox Corp., online lending company Affirm Holdings Inc. and ContextLogic Inc., the parent company of e-commerce application Wish, all companies with private market valuations in the trillion dollars.

One reason for the current rush is that recent tech IPOs have performed well. The embodiment of that success is data cloud software company Snowflake Inc., whose investors include Warren Buffett’s Berkshire Hathaway Inc. Shares in Snowflake have more than tripled since the company’s listing in September, which helps drive earnings on the Renaissance IPO Index, which tracks recently listed companies. . To date, that rate has more than doubled.

This is not an aberration. Historically, tough economic environments have increased the demand for growth-oriented tech stocks. Additionally, many tech companies have seen an added boost during the pandemic, which has accelerated long-standing industry trends like cloud software, food delivery, and video games. But for every tech unicorn that is now riding the wave from work from home to public markets, there is a question: What happens after the pandemic?

DoorDash, Airbnb, and Roblox seem to have good responses. DoorDash has leapt ahead to become the number one player in food delivery in the US, and is expanding into the local commerce market while flirting with profitability. Airbnb has shown nimble resilience in dire circumstances, indicating that it still has what it takes to be a travel industry leader going forward. And Roblox’s staggering success in the toddler games category bodes well for its ambitions to be the platform for virtual worlds, even after schools reopen.

Desire and Affirm are not in the same category. For Wish, which enables Chinese merchants to sell their cheap goods around the world, year-over-year sales growth slowed to 33% in its most recent quarter from 67% the previous quarter. Affirm clients are heavily focused on another action that has exploded amid the pandemic’s stay-at-home restrictions: The company, which offers installment loans to online shoppers, revealed that nearly 30% of its revenue comes from Peloton Interactive Inc. Shares in Peloton recently fell. on news of promising vaccine developments.

All of these IPOs may work fine at first. They are growing and that is positive. And many people will never go back to their less tech-enabled stock before the global locks. But the sensible investor should carefully examine the latest offers. As difficult as it is to imagine, the pandemic will not last forever. Of the harvest, DoorDash, Airbnb, and Roblox seem like gatekeepers.

(The second paragraph has been updated to include stock information from DoorDash.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following a previous career as an equity analyst.

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