Waterfront IPO With Great Views and Investor Hype

Availability: Nov. to Dec. 2020 (subject to change)

On Aug. 19, Airbnb opted to give investors no information about their listing by “confidentially” filing for their initial public offering (IPO). By filing “confidentially”, the company is not required to make the company’s financial statements publicly available until they’re closer to going public. Airbnb has a timeline of ~3-4 months before they go public.

(TAJ: What’s an IPO?)

Reviews: Be careful, property has been impacted by COVID

Founded in 2008, the booking platform, Airbnb, famously disrupted the hotel industry by allowing any Average Joe to rent out their home. The company was valued at $31b in 2017 and became the most highly anticipated IPO of 2020.

COVID put the company’s IPO in jeopardy and cut its valuation down to $18b in 2020… That is until the company filed to go public last week. Between April and May, Airbnb estimated its revenue for 2020 will drop by half from last year and immediately took emergency actions by raising $2b in debt and laying off 25% of the company (~2,000 employees).

Amenities: No information or financials

We don’t know much about the company’s financial details but here’s what we do know: The company had been profitable in 2017 and 2018 but began losing money in 2019. Losses in the last quarter of 2019 doubled to $276m and here’s why:

• Ramped up expenses to prevent racism, prostitution, gun violence and fraud issues… Issues with bad tenants and hosts have given Airbnb a bad rep in the media. A 2019 Vice investigation uncovered a nation-wide scam where property owners forced guests to switch their booking last minute and pay higher prices.
• Acquired competitors to turn itself into a full-fledged travel company… Made a number of large acquisitions including HotelTonight, a hotel booking company, and Urbandoor, an Airbnb-like tool for business travelers.

No rating: Lack of communication and accuracy but great location

Kathleen Smith, principal at Renaissance Capital, thinks that “investors are willing to look beyond COVID issues and value companies based upon post-COVID scenarios”.

• Meaning… Investors just might overlook their unprofitability issues to make the IPO a success.

Until the company releases their S-1 document, a document that shares the financial details and summary about the company, it’s too early to make a decision. If you plan on investing, here’s some questions to ask: What is the impact of COVID on their business? Does the company have a path to profitability? Where do you see the business in 5-10 years?