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Illustration: Rebecca Zisser/Axios

Fears of the "B"-word (bubble) are growing louder. There's a staggering split screen: a teetering economy with millions unemployed in a pandemic that's killing thousands per day and newly public tech companies riding high on nosebleed valuations.

Yes, but: Investors acknowledge the backdrop is bad. They say investors are piling into and betting on companies like Airbnb and DoorDash for better times ahead.

What they're saying: “The public markets have adopted a venture mentality,“ Joe Kaiser, a director at Mercato Partners, said during an Axios event earlier this week.

  • Investors are thinking about what a company like a DoorDash can do five years from now, Kaiser said. “That's why we're seeing valuations that look frothy," relative to the economic backdrop.

The other side: The soaring valuations show "the extreme exuberance and unprecedented liquidity in the market," James Gellert, who runs financial analysis firm RapidRatings, told the New York Times.

Airbnb's valuation is now roughly $86 billion —  a big leap from its $18 billion valuation in April, when the company took a huge hit as the pandemic rocked the economy.

DoorDash was last valued at $16 billion by private investors — but as of close yesterday, it's worth over three times more than that.

Data: FactSet; Chart: Sara Wise/Axios

One more: AI software company C3.ai went public this week — priced at $42 per share (already higher than its upwardly revised IPO range).

  • It opened on Wednesday at $100 and finished 120% higher. Yesterday it closed up another 40%.

The buildup: Earlier this week, there was record volume in the main IPO exchange-traded fund — which swaps in new, sizable public companies shortly after they debut. (The ETF is up about 3% so far this month, following its best monthly gain ever in November.)

The big picture: Stock market investors' euphoria over these tech stocks is another manifestation of the risk-on mentality that's ballooned even more in recent weeks, as the possibility of a vaccine and a return to normalcy appears on the horizon.

  • Plus: "You just have this worldwide phenomenon of capital infusion, money printing, low interest rates — where capital is being forced into equities markets," said Arjun Sethi, co-founder of venture firm Tribe Capital.

The bottom line: If the companies can't keep up with public market expectations, "you could see some carnage pretty quickly," Kaiser said.

Go deeper

Dan Primack, author of Pro Rata
Jan 14, 2021 - Economy & Business

Petco IPO raises $817 million

Illustration: Aïda Amer/Axios

Petco, a San Diego-based pet supplies and services company owned by CVC Capital Partners and CPPIB, raised $817 million in its IPO.

Why it matters: The company priced above its expected range, $18 vs. $14–$16, reflecting how the public markets just can't get enough of companies that cater to the cuddly fuzzballs.

Stalemate over filibuster freezes Congress

Illustration: Sarah Grillo/Axios

Senate Majority Leader Chuck Schumer and Mitch McConnell's inability to quickly strike a deal on a power-sharing agreement in the new 50-50 Congress is slowing down everything from the confirmation of President Biden's nominees to Donald Trump's impeachment trial.

Why it matters: Whatever final stance Schumer takes on the stalemate, which largely comes down to Democrats wanting to use the legislative filibuster as leverage over Republicans, will be a signal of the level of hardball we should expect Democrats to play with Republicans in the new Senate.

Dave Lawler, author of World
1 hour ago - World

Biden opts for five-year extension of New START nuclear treaty with Russia

Putin at a military parade. Photo: Valya Egorshin/NurPhoto via Getty

President Biden will seek a five-year extension of the New START nuclear arms control pact with Russia before it expires on Feb. 5, senior officials told the Washington Post.

Why it matters: The 2010 treaty is the last remaining constraint on the arsenals of the world's two nuclear superpowers, limiting the number of deployed nuclear warheads and the bombers, missiles and submarines which can deliver them.