Could Airbnb Go Public in 2020?

Written by Jennifer Clark
Posted October 2, 2019

It's a popular online marketplace that offers a place to stay when you’re away from home for a night or two, vacation accommodations, or tourism experiences. Yes, that’s right, I'm talking about Airbnb.

The San Francisco-based company finally announced plans for becoming publicly traded in 2020. There had been a lot of rumors about when and if it might take the plunge.

Airbnb has said that it won’t take the traditional route with the IPO process. It will instead opt to execute a direct listing, which will allow it to save millions of dollars by not paying fees associated with underwriters. It also won’t be required to issue any new shares. Other highly valued companies and tech startups, like Slack and Spotify, have gone the direct listing route, so this isn’t a new way to do things. 

The public and potential investors know Airbnb and its business, so there’s no need to spend more money marketing its brand. According to Bloomberg, Airbnb is privately valued at $31 billion. The company has claimed that it has a profitable business model, unlike most of the unicorns that hit the market this year. 

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It has been an unpredictable year for IPOs. Last year, rumors spread that Airbnb would go public in 2019. However, the year started out rocky with a U.S. government shutdown then a market lull because companies were afraid of market volatility. Things picked up and quickly went into a slow period; and it has been slow for most of the year. Though there were some real winners this year, it didn’t give Airbnb enough confidence to go public. 

Airbnb's executives have been discussing its IPO since at least 2018, and the longer the company waited, the greater the tension within it. Last summer, a group of Airbnb employees sent a letter to the company's founders pleading with them to take it public so that they could sell their stock options, as some expire in November 2020. This tension pushed Airbnb to consider going public sooner rather than later. 

In the last quarter, Airbnb earned more than $1 billion in revenue. Its earnings before interest, taxes, depreciation, and amortization were positive in 2017 and 2018. Uber’s former political adviser Bradley Tusk believes a direct listing would be beneficial for Airbnb, saying: 

What we’ve seen with Uber, Lyft, and the other big ones is that when you’re private for so, so long, you don’t get any honeymoon by the time you go public. Given the struggles so many tech companies have had in the past year and a half, it’s not shocking they might want to try something different.

Airbnb wants to do it right and make sure its value shines through, but there are a few things the company has to clear up before going public. It needs to solve the outstanding regulatory issues in some of its biggest markets, like Paris and New York City. If Airbnb fails to clear up regulatory battles before going public, it could create some serious doubt over the company’s valuation. 

2020 will be here soon, and there is a lot Airbnb has to get in order, but I think it could be one of the new year's successes. 

Until next time, 

Jennifer Clark
Pro Trader Today
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