One of the most hotly awaited stock market debuts sparked the predicted frenzy by investors as accommodation booking platform Airbnb began trading on Nasdaq.

After netting one of the biggest first-day rallies on record, soaring 113% to $144.71, the San Francisco-based company saw its valuation hit more than $85 billion.

Airbnb’s IPO was priced at $68, way above the $44 to $50 range estimated only a week before joining the US market. That gave the company a fully diluted valuation (including share options) of $47.3 billion, making it the biggest listing by a US company in this pandemic-impacted year.

While the stock has since pulled back to $130, Airbnb’s stunning debut blew away any lingering doubts about investors’ appetite for intriguing growth stocks and sparked a fresh debate about the level of rationality being applied to equity valuations.

‘Shares are being driven by narratives meaning that those with a story regardless of its merits have a high valuation and those that don’t, do not,’ says Richard Windsor of research group Radio Free Mobile.

Airbnb has a story to tell. Investors have been lured by its perceived scope to unhinge the traditional hotels business model and the promise that it will soon be back on a big growth trajectory as travel demand returns through 2021 and beyond.

Airbnb’s $77.5 billion valuation means that the company founded just 12 years ago is now worth more than global hotel chains Hyatt Hotels, Hilton Hotels and Marriott International combined, which may draw parallels with Tesla and its own valuation dominance over major car makers.

Last week, US food delivery business DoorDash jumped 86% to $189.51 after making its own market debut, triggering a positive read-across for UK-listed rival Just Eat Takeaway (JET) whose shares were also in demand. Just Eat Takeaway will become a significant rival of DoorDash in the US once it completes its $7.3 billion Grubhub acquisition. Shareholders voted in favour of the deal back in June.

‘Cash is flowing into tech stocks for no other reason than they are tech stocks which have weathered the pandemic better than the rest of the economy,’ says Radio Free Mobile’s Windsor.

Video games company Roblox and fintech business Affirm, which had both been primed to join the US stock market this month, have reportedly delayed their respective IPOs until 2021.

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