“We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere”
“Work-from-home became work-from-any-home on Airbnb.”
“Idea of strangers staying together, in each others’ homes, was not so crazy after all,”
Brian Chesky, Airbnb CEO
The flotation comes at the time of an enthusiastic stock market and when investor appetite for tech companies is soaring. Price of $68 per share for 51,323,531 and $47b valuation fetched ahead of the listing. topped the initial target range of $44-$50 and the final price range of $56-$60 raised on the back of investors demand. But what happened on the listing date exceeded the expectations of most analysts. Airbnb surged on the first day of trading, opening at $150, peaking at $165 shortly after open and closing at $144.71 which gives the firm valuation of more than $100bn. $3.7 billion raised in Airbnb offering, topping $3.4b raised by meal delivery app DoorDash (one day before), making it the biggest U.S. IPO this year.
Risks
Imminent risk is pandemic which between April and May caused Airbnb’s business to drop by 80%. As a result Airbnb cuts 25% of staff and raises $2bn in emergency funds after plunging revenues due to travel downturn, caused by pandemic. From IPO filings we can learn that in the first nine months of 2020 the company lost $700m on $2.5b revenues.
Airbnb admitted that after lockdowns, some guests brought bar and club behaviours to homes rented via platform. It banned house parties and limited occupancy to comply with limits on gatherings. Airbnb also banned some users below the age of 25 in the UK, US and Canada from booking entire homes. It also promised to pursue legal action if guests or hosts break the rules and cause neighbourhood nuisance.
Impact of pandemic on the revenues is not the only worry in fact Airbnb’s growth was slowing well before the pandemic. Some of which can be explained by the large scale of the business leading to hosts already starting to compete with each other in larger metropolitan areas in developed countries where Airbnb is already popular. Below we can see annual and quarterly growth published in the company’s prospectus.
…. article in progress….