Short Seller Bear Cave Attacks Airbnb; White Knight Comes to Its Defense

Airbnb is one of the few tech/consumer-focused businesses that has remained strong despite a slowing economy.

Nearly 15 years after its founding, the $70B rental company continues to grow its sales and profits — but Airbnb’s also had its fair share of problems:

• Business: Guest horror stories, outrageous fees and competitive pressure from other rental platforms and hotels.
• Market: $ABNB is down nearly 20% since going public in 2020 (vs. the S&P 500’s 12% gain).

The investment case against Airbnb

Last week, The Bear Cave stirred up the investing web by releasing their “Problems at Airbnb” report attacking the rental platform.

The Science of Hitting (TSOH) Investment Research responded with a rebuttal to Bear Cave’s arguments.

• Bear Cave’s POV: Airbnb’s future will be much different from its past — with more competition ahead.
• TSOH’s POV: Airbnb is a high-quality business with a bright future.

Here are some of the main arguments from The Bear Cave (and TSOH’s rebuttals):

1/ Airbnb is plagued with scandals and horror stories of bad experiences.

TSOH’s rebuttal: This will always be a risk, and Airbnb’s response has improved over time. It’s also only relative to a small portion of stays. In June 2021, under 0.1% of bookings led to safety issues reported — not much different from historical numbers.

2/ Top hosts are building their own platforms and offering discounts to book on them.

TSOH’s rebuttal: For an average individual host, it’s not worth listing elsewhere — and Airbnb’s lead over rival rental platforms continues to grow (>3x the number of active listings vs. Vrbo). And ~70% of listings are only available on Airbnb.

TSOH has never owned $ABNB — but says he would invest at the right price (hasn’t been right yet).