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What to Know about the Airbnb IPO
News outlets are reporting that Airbnb aims to raise approximately $3 billion in the initial public offering. At this public valuation, Airbnb would be worth approximately $30 billion dollars. Earlier Wall Street rumors indicated that hedge-fund mogul Bill Ackman tried to entice Airbnb to consider going public through a SPAC (special purpose acquisition company), which would have allowed the company to keep much of its data and balance sheet more private. However the company has since decided to pursue a traditional IPO. We can thus look forward to getting our first peek into the Airbnb books when they are forced to go “open kimono” during their expected investor roadshow in December.
No, Airbnb is not currently running at profitability. While 2017 and 2018 saw positive EBITDA results, 2019 saw losses of more than $300 million in the first 9 months as spending on marketing and global expansion eclipsed revenue. Then, of course, the coronavirus began decimating the global travel industry for most of 2020, and Airbnb did not escape unscathed from the virus’ wrath. Airbnb needed to secure emergency financing from investors such as Silver Lake and Sixth Street Partners in April, as the company was hit by a veritable tidal wave of cancellations and refund requests in the wake of the first wave of the Covid pandemic.
A successful IPO would mark a dramatic turnaround for the company of whom many wondered aloud about its ability to survive in a global pandemic environment. But it is important to bear in mind that this decision to IPO in late 2020 is coming against a backdrop of “runaway viral spread” and the highest daily Covid infections to date in the USA. Are we going to see another wave of Airbnb reservations get cancelled amid fresh calls for lockdowns? It is a nervy position to be in for sure, and it may be an indication of how desperate Airbnb is to secure fresh funding if it is pursuing an IPO in such fraught times for travel.
Unfortunately, the primary impacts that Airbnb property owners and vacation rental managers are currently feeling from the company’s plans to IPO are negative. In order to survive and avoid bankruptcy in the pandemic travel landscape, Airbnb was forced to slash 1900 jobs - more than 25% from its total workforce of 7500+. Many of these cut positions were in the customer service and programming sphere, and hosts and guests alike are now experiencing technical glitches, delayed payouts, and unresolved customer service issues that can drag on for weeks. To look attractive to investors, the company has maintained a very lean workforce throughout the pandemic. One may only hope that with new funding from the IPO, some of these positions will be refilled and the level of site performance and customer service can rise to former levels.
Property owners and managers intuitively know that once the travel industry can get past Covid-19, that the industry can achieve record profitability once again. But the timing of when Covid-19 will be defeated is still frustratingly uncertain for everyone. Until then, Airbnb and the vacation rental industry have current CDC guidance as a tailwind. In a recent travel update from October, the CDC suggested that renting a vacation home is arguably safer than staying in a hotel, as vacation rental guests do not have to contend with shared elevators, entrances, and other common areas. Through this lens, an Airbnb IPO can then be seen as a stop-gap measure to carry the company through the remainder of tough pandemic times, and to put it on a path towards profitability in a post-Covid future.