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Business Maverick: Airbnb, DoorDash Rallies Stoke Renewed Debate on Pricing IPOs

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First it was DoorDash Inc. And now it’s Airbnb Inc. In a 24-hour period, the two startups went public and their valuations skyrocketed, a sign that both companies could have raised a lot more money than they did.

Airbnb opened 115% above its initial public offering price, the biggest debut rally on record for a large U.S. listing. Had the shares priced closer to where they started trading — at $146 instead of $68 apiece — Airbnb could have raised $4 billion more for the company and early investors.

Morgan Stanley and Goldman Sachs Group Inc. were lead advisers to Airbnb, responsible for deciding, along with the company’s executives, where the stock should price. When the parties convened on their Wednesday evening call to discuss that number, the performance of DoorDash — which had just soared 86% in its debut — was on their minds, according to people familiar with the matter.

The reason for the extreme pops this week is a mix of advisers finding demand from retail investors hard to measure, and scarcity of shares available to buy on trading day, people familiar with Airbnb and DoorDash’s IPOs said this week.Retail investors drove a lot of the early activity around Airbnb, according to people familiar with the matter, sending the price up as they hustled to get a slice of the trading.

DoorDash Chief Executive Officer Tony Xu, meanwhile, acknowledged DoorDash didn’t choose the highest price possible for its IPO. “We priced our stock where we did not take every last dollar off the table but where weScarcity played a major role in the rallies. DoorDash sold only about 10% of its shares, making supply hard to come by on Wednesday. Shares slipped slightly on Thursday, closing down 1.9% but still ending the day at $184.50, way above its $102 IPO price.

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