Perhaps one of the most anticipated IPOs (Initial Public Offering) of 2020, that of Airbnb, has been pushed indefinitely after the company has taken a big hit following the COVID-19 outbreak. Although corona crisis has hit nearly every business and industry, the tourism sector has especially been thrown for a loop, as travel restrictions around the globe cause for major disruption.
Airbnb, the largest operator of home-sharing services, had released a statement in September 2019 that it plans to go public in 2020. During that time, the company was last valued at $31bn in 2017. It was one of the tech “unicorns” and held multiple successful fundraising rounds raising a total of $4.4bn in VC investment.
In March 2020 however, Airbnb saw a 40 percent drop in bookings. In addition, Airbnb has refunded every booking made during the months of March-October instead of offering vouchers as similar companies have done. In response to all of this, Airbnb’s valuation dropped to $18bn. This drop is not all corona-virus related however, as the company already got criticized for an unprofitable 2019, despite two profitable previous years. Airbnb’s CEO Brian Chesky has told employees about an expected $800 million cut in marketing spending, along with letting go 25% of the total workforce.
It is an interesting development in the tech world, where there is a large divide in companies thriving in this time (e.g. payment service Mollie reaching unicorn status, video service Zoom seeing a massive increase in value) versus companies that have done so well the past years but find themselves in a slippery slope caused by the corona crisis.
All in all, the question arises whether Airbnb will still go public this year, or whether plans have been put on hold. David Hsu, a professor at the University of Pennsylvania’s Wharton Business School, quoted in Bloomberg that “You want to come in with your best foot forward in a public listing – and this virus is hitting Airbnb hard,”. There is a risk attached to entering the public market after an unprofitable year, as there is no doubt that investors will have taken a hit from poor performance of other companies as well.
Do you think Airbnb will still file for its IPO this year?
Airbnb. (2020). Extenuating circumstances policy and the coronavirus (COVID-19)—Airbnb Help Center. Airbnb. https://www.airbnb.com/help/article/2701/extenuating-circumstances-policy-and-the-coronavirus-covid19
Carville, O. (2020, March 2). Airbnb’s 2020 Stock Market Debut Imperiled by Coronavirus. Bloomberg.Com. https://www.bloomberg.com/news/articles/2020-03-02/airbnb-s-path-to-2020-stock-listing-imperiled-by-coronavirus
Chesky, B. (2020, May 5). A Message from Co-Founder and CEO Brian Chesky. Airbnb Newsroom. https://news.airbnb.com/a-message-from-co-founder-and-ceo-brian-chesky/
Helmore, E. (2019, September 19). Airbnb announces it will go public next year after WeWork delays IPO. The Guardian. https://www.theguardian.com/technology/2019/sep/19/airbnb-ipo-2020-value
Kunthara, S. (2020, August 12). Airbnb Still Eyeing The Public Market Despite Pandemic Effects. Crunchbase News. https://news.crunchbase.com/news/airbnb-still-eyeing-the-public-market-despite-pandemic-effects/
Lombardo, C. D., Maureen Farrell and Cara. (2020, August 11). Airbnb Plans to File for IPO in August. Wall Street Journal. https://www.wsj.com/articles/airbnb-plans-to-file-confidentially-for-ipo-in-august-11597164041
Schaal, D. (2020, April 8). Airbnb’s Valuation Almost Halved to $18 Billion. Skift. https://skift.com/2020/04/08/airbnbs-valuation-almost-halved-to-18-billion/
This is an interesting question. However I do believe that Airbnb should wait for at least another year before going public. The COVID-19 pandemic has changed a lot of things and people might have realized that other ways of taken vacation exists. For instance, this year’s trend was the “Staycation” which entails staying in your home country and taking vacation there. This could in the long run decrease the number of travelers using Airbnb and thus decrease Airbnb’s profit. So I believe that it is important for them to step back and wait for the pandemic consequences to happen.
Hi Simone!
Thanks for posting.
I think that Airbnb will still file for its IPO this year.
Firstly, the home-rental company will do this by pitching investors on its quick turnaround and ability to adapt to the new status quo.
Secondly, usually a lot of US companies are pushing to reach the market before a November election, as this causes the stock market to experience volatility. Airbnb most likely will try to make its debut stand out by emphasizing its business ideology “stakeholder capitalism”, which is a vision that aims to benefit all its stakeholder over the long term.
Finally, there are no signs that travel demand will recuperate in the near future. The company could be worse off if it keeps delaying its IPO date, as their valuation could keep taking cuts.
Do you think Airbnb will still file for its IPO this year?
Great blog post Simone!
I believe Airbnb would be wise to still file its IPO this year. Supporting Dennis, I believe Airbnb can take advantage by showing its quick turnaround. The spike downwards can potentially be quickly corrected when business returns to more usual trading. Compared to other big players in the accommodation sector such as Marriot and Accor, Airbnb is relatively asset light. Common knowledge dictates that if firms want to survive/thrive, going digital is essential. In this manner, it’s the digital platforms that win from the classic hotel offerings. At this point most industries are taking big hits and betting on the most agile one would be a smart move.