Airbnb Gets One Step Closer to Going Public

Written by Jennifer Clark
Posted November 18, 2020

On Monday, Airbnb filed its IPO prospectus with the U.S. Securities and Exchange Commission (SEC). The much-talked-about initial public offering from Airbnb has been highly anticipated for years. The company was founded back in 2008 in San Francisco, California. Since then, it has become a major disruptor in the travel industry. It provides a marketplace for online vacation rentals that range from entire homes to small rooms or apartments. Staying at a hotel can get pricey, especially if you want a hotel that is clean and has amenities. Airbnb gives people looking for a place to stay more options, with better deals for the money-conscious.

According to Airbnb’s IPO prospectus, the platform has more than four million hosts, who have opened up accommodations to the public. 2020 has been a very unusual year thanks to the pandemic. Airbnb was one of many businesses directly affected by the coronavirus, with most of the world locked down during the spring. So far in 2020, the company has reported a net loss of about $697 million on revenues of $2.52 billion. There was a significant decline in people traveling for leisure and business for much of the year and those levels still haven't returned to normal as the coronavirus is very much still in our lives.

In its prospectus, Airbnb said of its risk factors:

The Covid-19 pandemic and the impact of actions to mitigate the Covid-19 pandemic have materially adversely impacted and will continue to materially adversely impact our business, results of operations, and financial condition.

Coronavirus cases are surging higher than ever in the U.S., and the rest of the world is still working hard to contain the virus, so traveling isn’t the first thing on people’s minds. Then again, they likely can’t wait for a time when they can actually travel without feeling anxious about contracting an airborne virus. Most states in the U.S. are advising residents to refrain from traveling unless it’s absolutely essential. If they choose to travel, they should get tested and quarantine upon arrival and return. It’s a lot to consider, it's best for people to just stay home.

With that being said, it’s questionable that Airbnb has decided to go public right now. While Airbnb hasn’t announced when it might have its IPO, if the company has filed its paperwork, we can assume it's considering an IPO in at least the next 2–3 months. It’s been a tough year for Airbnb; going public would not be that helpful, especially with so much uncertainty surrounding COVID-19 and how much longer our lives will be impacted by it.

The company plans to trade on the Nasdaq under the ticker symbol “ABNB.” Reuters indicates that Airbnb plans to raise about $3 billion in its offering, which would put the company's valuation at over $30 billion. Analysts expect Airbnb to price its IPO in December. According to the company's prospectus, its revenue plummeted 72% in the second quarter of 2020, decreasing its valuation and increasing its high-interest debt by about $2 billion. It does appear that Airbnb is doing a lot better than other companies in the travel industry, and it's even showing signs of bouncing back little by little. People were still traveling, but they weren't staying in popular cities like New York, Chicago, or Los Angeles. Instead, they were looking for cabins and houses near lakes and mountains to escape for a holiday weekend or a new place to work remotely. Airbnb said in its filing:

They decided to get in their cars and travel close to home, often staying in small towns and rural communities. Our business rebounded faster than anyone expected, and it showed that as the world changes, our model is able to adapt.

This is an important statement and hopefully an accurate one, not something to entice prospective shareholders. If Airbnb is adaptable during difficult times that would normally destroy a business, then the company just might be worth the consideration.

Until next time,

Jennifer Clark
Pro Trader Today
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