Airbnb Inc, in a long-awaited filing for an initial public offering, outlined widening losses and plunging revenue while projecting optimism for a rebound in demand for home-sharing when the economy eventually recovers from the coronavirus pandemic.
The listing is set to be one of the biggest this year, capping an IPO surge that has largely defied the economic devastation inflicted by the pandemic.
The company’s filing Monday confirms the damage it suffered as Covid 19 wreaked havoc on the travel industry. Its gross booking value for the nine months ended Sept. 30 tumbled to $18 billion, down almost 40% from the same period last year, it said.
Airbnb had a net loss of $697 million on revenue of $2.5 billion for that nine-month period, compared with a net loss of $323 million on revenue of $3.7 billion for the same period last year, according to the filing.
The San Francisco-based home rental platform listed the size of the offering as $1 billion, a placeholder that will change as its bankers test demand for the shares. The number of shares to be sold and their proposed price range will be disclosed in a later filing. People familiar with the company’s plans have said it will seek to raise as much as $3 billion in an IPO in December.
After its business was throttled by the pandemic in March, Airbnb’s bookings bottomed out in April, plummeting 72% from the previous year. It reduced marketing expenditures and cut its full-time employee headcount by about 25%. By June, bookings were down just 21% year-over-year.
After a rough second quarter, a surge in people taking near-home vacations elevated the third quarter to Airbnb’s most profitable ever on the basis of earnings before interest, taxes, depreciation and amortization. It reported $501 million in income on an adjusted Ebitda basis, a big swing from the $400 million loss in the second quarter.
Still, Airbnb’s revenue for the third quarter was $1.3 billion, down 18% from the same period in 2019, according to the filing.
Airbnb, though, has weathered the travel slump better than its competitors: Booking Holdings Inc’s revenue in the third quarter was down 48%, and Expedia Group Inc’s was down 58%.
Airbnb’s offering will be led by Morgan Stanley and Goldman Sachs Group Inc. Allen & Co., Bank of America Corp., Barclays Plc and Citigroup Inc. are also listed as underwriters. Airbnb plans for its shares to trade on the Nasdaq Global Select Market under the symbol ABNB.
The listing venue was a victory for Nasdaq Inc. over the New York Stock Exchange. Airbnb’s listing is expected to be the biggest on Nasdaq since Facebook Inc.’s 2012 IPO.
The company’s potential valuation in an IPO can’t be precisely calculated until the proposed terms and other details are revealed in a later filing.
While Airbnb’s valuation reached $31 billion in a funding round in 2017, warrants in an April round of debt and equity securities that included Silver Lake and Sixth Street Partners valued it at only $18 billion, Bloomberg reported.
Airbnb’s investors included the venture capital firm Sequoia, which had 16.4% of the voting power leading into the IPO. Other top investors include Founders Fund with 5.4% and DST Global with 2.3%.
Those investors, along with the company’s executives and directors, will be able to control the company through Class B shares, which will carry 20 votes each compared with one vote each for the Class A shares being sold in the IPO.
Similarly to Uber Technologies Inc.’s directed share program for drivers in its 2019 IPO, Airbnb is reserving a portion of its stock for its hosts. It will apply only to those residing in the US who have hosted guests in 2019 and 2020.
Airbnb is set to join food delivery company DoorDash Inc., which filed Friday to go public, in a finale to what is already a record year for IPOs.
Driven mostly by the proliferation of special purpose acquisition companies, or SPACs, and to a lesser extent by software companies, an all-time record of more than $141 billion has been raised on U.S. exchanges in 2020, according to data compiled by Bloomberg.
Along with Airbnb and DoorDash, online discount retailer Wish Inc. and installment loans provider Affirm Inc. are expected to complete IPOs by the end of the year, people familiar with their plans have said.
One consequence of the pandemic was that Airbnb opted to issue new shares to raise capital in a traditional IPO. It had previously leaned toward a direct listing in which its investors could have put their shares on the market without waiting for an IPO lock-up period to expire and without the value of their shares being diluted by the issuance of new stock.
Castles, Sheep Wagons
Airbnb was founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk in 2008 during the financial crisis as a cheaper alternative to hotels.
The company attained a $10 billion valuation in a 2014 funding round. Chesky, the chief executive officer, faced mounting pressure from employees in 2018 to take the company public. With some employees’ stock options approaching expiration dates, that pressure had built.
Unlike most other IPOs, most current and former employees won’t have to wait for a months-long lockup period to sell any of their stock. They will be able to sell up to 15% of their shares with an initial seven-day trading period, according to the prospectus.
Airbnb operates as a two-way platform, connecting people who want to rent all or part of their homes to make extra cash with travelers seeking cheap – and sometimes quirky – accommodations. Castles, tree-houses, caravans, sheep wagons and even Will Smith’s wing of the Fresh Prince of Bel Air mansion have all been advertised on Airbnb.
The platform makes its money by taking a cut of the bookings.