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This paper is divided into two parts, a literature review, and a case study on Airbnb. The first section exhaustively describes startups, considering the different stages they experience throughout their first years and the forms of financing they have. Next, twelve valuation methods are evaluated, divided into six traditional and six alternative methods for startups. Finally, in order to adapt the study to aspects that are beyond the intrinsic characteristics of the company, it is important to take into account macroeconomic facets such as interest rates, which are directly related to the valuation of startups. This is what is being seen in the current situation, that a high inflation has resulted in a pronounced rise in interest rates, causing the valuation of companies to plummet, as investors have less incentive to risk their capital with less predictable ventures instead of lending it at high rates, and founders find it more expensive to borrow money from banks, making them more dependent on investors. The second section begins with a qualitative assessment of Airbnb, with both a company and an industry overview, and it is followed by the company valuation using the methods analyzed before. The study suggests a share price range between $170.0 and $185.0, which is above the market price at the time of the valuation, on April 30, 2022, valuing the company’s stock at $159.7. These results indicate that Airbnb stock is slightly underpriced in the market, probably due to the still uncertain COVID-19 future outcome. In addition, it is shown that the price of $68 per share in the IPO was particularly low, a fact that could already be seen on the same day when the price was adjusted to $146 before starting to trade. Thus, the price with which Airbnb started on the stock market is also justified, having been a success for its first shareholders. Finally, from this analysis can be seen the great complexity when valuing a startup given the variability of the results obtained in the study. In the case of Airbnb, which has some characteristics of startups and others of a mature company, it is especially important to combine both traditional and alternative methods to try to assess this characteristic with maximum precision. The most reliable methods for this case study are those that consider longer-term forecasts since the effects of the pandemic are minimized, in particular the DCF, the LBO, the Venture Capital, and the First Chicago approaches. |
