What are the advantages of going public?
The cash raised can be utilized for varied issues, together with investments, acquisitions and paying off the cash Airbnb borrowed to navigate the well being disaster earlier this yr. It’s also a method for the corporate’s founders and early buyers—together with members of the family, staff and venture-capital companies—to promote some or all of their stakes and earn a living from their preliminary bets on the startup. It isn’t identified what number of would possibly promote on the time of the IPO. The corporate has stated it will enable its staff to promote as much as 15% of their shares when it lists subsequent month.
Why now?
Airbnb’s management—together with Mr. Chesky, the corporate’s chief government—toyed with the thought of going public for a number of years. Some early buyers and staff, a handful of whom are set to lose their inventory choices subsequent yr, have been making use of stress on the CEO to take the corporate public so they may money out. Airbnb had deliberate to make its extensively anticipated debut earlier this yr, however then the pandemic hit, hammering bookings in Asia, Europe and the U.S.
Airbnb’s debut is slated to return on the finish of a year that has already broken records for IPO dollars raised, getting into a market the place buyers largely have been bidding up shares of newly public corporations.
What’s going to Airbnb’s market cap be?
Airbnb is predicted to garner a valuation of roughly $30 billion in its providing, in line with individuals conversant in the deal, although valuations can change till an providing is priced. Airbnb’s valuation fell to $18 billion when it raced to safe a mortgage as bookings fell in the course of the pandemic earlier this yr. It was valued at $31 billion in a 2017 funding spherical.
Journey-hailing large Uber Technologies Inc. closed its first day of buying and selling final yr at a valuation of $76 billion, lower than its priced offering. Its market capitalization is greater than $85 billion at the moment.
How can buyers purchase shares of the newly public firm?
Airbnb’s underwriting group, led by Morgan Stanley and Goldman Sachs Group Inc., will give an preliminary allocation of shares to a mixture of institutional buyers, together with mutual funds and hedge funds, and a few particular person buyers, at a set worth on the day earlier than it begins buying and selling on the Nasdaq change. As soon as Airbnb’s shares begin buying and selling, particular person and institutional buyers can purchase the shares via a brokerage agency.
How has Airbnb’s enterprise fared in the course of the pandemic?
The pandemic initially crushed the company’s business. Income within the three months that ended June 30 dropped 72% from the year-earlier interval. The loss over the identical interval practically doubled.
However enterprise picked up within the three months ending Sept. 30, main income to fall simply 18% from the year-earlier interval. An unexpected pickup in native stays, mixed with deep value cuts, led the corporate to publish a revenue of $219 million over the interval.
The June-September quarter is often robust for the platform due to seasonal elements together with summer time holidays, and Airbnb has turned a revenue in that interval since 2018. The truth that it squeezed out a third-quarter revenue this yr is notable, however its future prospects will rely upon whether or not it will possibly flip different quarters and, ultimately, an annual revenue.
How did Airbnb come again from the brink?
Mr. Chesky pivoted rapidly to elevating capital to maintain the enterprise afloat, laid off 1 / 4 of workers and shed noncore companies.
The CEO had drawn criticism for spending huge earlier than the pandemic. However he lower 54% of selling prices via the 9 months ended Sept. 30, in contrast with the year-earlier interval. Complete bills over the interval declined 22%.
Mr. Chesky individually ordered a redesign of Airbnb’s app and web site so the corporate might deal with native stays in the course of the pandemic—a technique that paid off as individuals ventured into neighboring communities in order that they didn’t must fly. Many customers seen staying in stand-alone properties as safer than utilizing shared amenities in lodges. Mr. Chesky spoke to The WSJ final month about steering the company out of its worst crisis.
Why are some potential buyers inspired by its financials although it has by no means posted a full-year revenue?
Airbnb’s gathered losses since its 2008 founding totaled $2.1 billion via Sept. 30.
It reported a lack of $697 million via the primary 9 months of this yr, greater than twice as a lot as within the year-earlier interval, largely due to shrinking income earlier within the well being disaster. Its $674 million loss final yr was better than its losses within the earlier 4 years mixed, as the corporate spent huge on advertising and different administrative prices.
That stated, most Silicon Valley startups are bleeding purple ink once they go public. Airbnb’s mixed losses are nonetheless a fraction of the $7.9 billion that Uber reported via 2018, the yr earlier than it went public. Uber was based seven months after Airbnb.
What are another dangers of investing in Airbnb?
The Covid-19 pandemic continues to be Airbnb’s largest near-term problem. Traders should additionally deal with danger elements resembling cities weighing zoning restrictions on short-term leases and Airbnb’s difficulties policing crime and selling security on its platform—a matter that’s anticipated to attract extra scrutiny because it turns into a public firm. Airbnb is without doubt one of the few Silicon Valley startups with a presence in China, although the U.S. and Europe proceed to be its largest markets.
The corporate stated a protracted deterioration in U.S.-China relations might damage its enterprise. It additionally stated it’s topic to numerous necessities and requests from authorities companies to share details about customers of its platform in China. “We have to make sure that our enterprise practices in China are compliant with native legal guidelines and rules, which can be interpreted and enforced in methods which are totally different from our interpretation,” Airbnb has stated.
