Things to Know Before Buying Airbnb Shares Right Away
You should know these things before investing in Airbnb after it makes its public market debut today, according to MarketWatch.
Airbnb is a widely known brand and investors have been eager to get their hands on shares. In addition to the attraction of Airbnb's business model, it has been a strong year for IPOs that may lead investors to invest as soon as possible. It is important to keep in mind that despite recent positivity regarding vaccines, there is still uncertainty for the travel industry going into 2021.
Airbnb's IPO documents filed with the Securities and Exchange Commission explicitly state that “in light of the evolving nature of COVID-19 and the uncertainty it has produced around the world, we do not believe it is possible to predict COVID-19’s cumulative and ultimate impact on our future business, results of operations, and financial condition.” The document continues adding, “we believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.”
Retail investors need to be aware of the volatility that IPOs typically experience in the early stages of the market debut, according to John Bovard, owner of Incline Wealth Advisors in Cincinnati, Ohio. These stocks have no trading history or indication of where investors believe they should be priced. “I have experience. It was still nerve-wracking for me,” Borvard said. “The best thing I did was hold onto it.” If the Airbnb shares at some point dip big, “just hang on, just hold onto it,” he said.
Furthermore, just because you understand Airbnb's business model doesn't mean you should jump into ownership. There is a fine line between understanding a business model and investment risk associated with that business model.
“Do your research, look at competitors, and understand what you’re investing in with the thought that quarantine and lockdowns won’t last forever,” said Treyton DeVore, a financial planner at Piertree Planning, based in Kansas City, Mo. “There’s always a lot of hype around IPOs. Don’t let FOMO push you into buying a stock just because everybody else is.” Furthermore, it's important to add that buying a stock right after its IPO isn't a quick way to get rich.
“The biggest winners in IPOs are generally the early investors who invested in the company before the IPO,” DeVore said. For example, when Snapchat went public it took more than 3 years for investors to break even. It is important to note that Snapchat is now up 200 percent YTD.
That being said, if you are considering an investment in Airbnb, it is probably in your best interest to buy and hold Airbnb shares for the long term. Bovard is bullish on Airbnb but recommends that investors only allocate 10 percent of their liquidity to speculative stocks.
"One approach would be to dip your toes in, and buy some stocks at the open and consider buying more over time, rather than all at once,” said Jared Friedman, a financial planner at Redwood Financial Planning in Scotch Plains, N.J.