Journal Report

Journal Report 23: Airbnb’s IPO

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What’s going on here?

  • Airbnb finally filed for IPO (S-1 form link) on Nov 16, 2020, after 5 years of rumor.
  • Its valuation is now ~ $18 bil, compared with the $31 bil valuation in 2017. Pricing terms are not yet set.
  • Lead underwriters are Morgan Stanley and Goldman Sachs.

Airbnb’s recent performance

Gross Booking Value

LOGO

  • The Gross Booking Value exhibits a robust growth from 2017 to 2019, until Covid hits 2020.
  • The business seems to rebound late in the 2nd quarter as domestic travel picked up.

Costs

In response to the plummeting revenue and macro situation, Airbnb has made efforts to cut costs:

  • The largest reduction was in sales and marketing by 54$. This seems reasonable given that advertising of traveling would not work if people cannot travel.
  • Its workforce was cut by 25% and executive salaries were also cut
  • It raised $2 billion in high-interest debt to stay afloat.

Customer characteristics

  • People start to take trips closer to home, driving the proportion of domestic travel to 80% from 52% before the pandemic.

Competitors

  • Online travel platforms: Booking Holdings, Expedia, Trip.com
  • Search engines sites: Alphabet, TripAdvisor, Trivago

What’s expected then?

  • Airbnb’s business has been proved to be seasonal, and the peak seems to be in Q3 every year. Therefore, some might fear that Airbnb’s performance in Q4 2020 would not be as good as that in Q3 due to this seasonality nature.
  • However, vaccine news is expected to have a positive impact on investors’ expectations. Airbnb should then make efforts to make the results in Q4 close to Q3 to show its resilience.

A good year for IPO:

With so fat 184 IPOs (+24% YoY) that have raised $63.7 billion (+47% YoY), 2020 is considered a good year for IPO, and more to go:

  • DoorDash – a leading food-delivery app – recently filed for an IPO that could potentially raise $2 bil in December.
  • Roblox – an online game platform and Wish – an online discount retailer, also could go public by the end of 2020.
Content source:
1. Natasha Mascarenhas, Alex Wilhelm. (2020) Equity Shot: Airbnb’s IPO is finally here. Techcrunch. Available at: https://techcrunch.com/2020/11/16/airbnb-ipo-s-1-equity/ [Accessed on November 23, 2020]
2. Brian Deagon. (2020) Long-Awaited Airbnb IPO Emerges From Coronavirus Wreckage. Investor's Business Daily. Available at: https://www.investors.com/news/technology/long-awaited-airbnb-ipo-emerges-from-coronavirus-wreckage/ [Accessed on November 23, 2020]

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