What to know about Airbnb’s 2020 IPO

The year 2020 is an earmark for most industries, and the travel sector is no exception. Airbnb knows this firsthand. But despite a struggling travel economy, they’ve managed to make the first move toward going public. Here’s what we know about Airbnb’s confidential filing to the SEC and the Airbnb IPO. All the while, we’re taking a look back at the company’s past, and a look forward for what’s to come — for the company itself and investors who are ready to hop on the Airbnb IPO bandwagon. 

TL;DR

  • Airbnb was officially founded in 2008. It started as three housemates offering up a few air mattresses in their San Francisco apartment for $80 per night.
  • In 2017, the company hit a $31 billion valuation. Now, with the pandemic affecting the travel industry, they’re down to $18 billion. In May, the company laid off about a quarter of their employees.
  • After a reported financial rebound, Airbnb has submitted their Form S-1, or draft registration statement, to the SEC. Currently, it’s a confidential filing, which means no info on the company’s finances.
  • Morgan Stanley is underwriting the Airbnb IPO process and will help them attract investors. As for the Airbnb IPO date, they’re on the SEC’s time.
  • When the company releases their prospectus, investors will benefit from reviewing it for intent and financial data.
  • You can learn more about IPOs here.

A brief company history

The Airbnb brand was built on need — two housemates, Brian Chesky (now-CEO) and Joe Gebbia, felt bogged down by their San Francisco rent. And when local conferences left hotels overflowing, the solution seemed obvious: a few air mattresses to rent out in their very own home at $80 a night. At the time, the platform was called airbedandbreakfast.com.

The company quickly evolved, with Chesky, Gebbia and now a third housemate Nathan Blecharczyk officially founding it in August 2008. A Craigslist-meets-Couchsurfing type of platform, it wasn’t long before they began to expand — first to Denver during the 2008 Democratic National Convention, then ultimately across the globe.

Airbnb’s first investor was Paul Graham, now-retired founder of startup catalyst Y Combinator. With $20,000, he gave the company a chance to work on creating a truly desirable software-based product.

In 2009, the company streamlined their brand name from Air Bed & Breakfast to Airbnb. Then came the Sequoia Capital investment — worth $600,000 — that really helped things take off.

The rest, as they say, is history. But the fact that a company that once hit $31 billion in valuation started on such humble grounds (something that seems like it’d be impossible to start in the 2020 health crisis, no less), and managed to grow to great heights in just 12 years, is well worth pondering.

A look at the colorful world of Airbnb fundraising

The Airbnb founders have a background in design, something that helped them with their very first fundraising effort back in 2008. When Obama and McCain were going head to head for a chance at the presidency, they designed and sold custom cereal boxes that read “Obama O’s” and “Cap’n McCain’s” for $40 a box. In the end, they raised $30,000.

You can see a blast from the past on a historically preserved Air Bed & Breakfast page here.

Modern-day Airbnb fundraising efforts aren’t quite so guerilla, but they are profitable.

Right in the throngs of the COVID-19 pandemic, Airbnb announced its fundraising efforts worth $1 billion. In April, two private equity firms — Silver Lake (who invested $1 billion in Twitter just a month prior) and Sixth Street Partners —  contributed to the investment in both debt and equity. Keep in mind that this was a time when Expedia stocks dipped 40%, proving the travel industry’s volatility during a global health crisis.

According to Airbnb, they had a number of investors interested in them during this time, which just goes to show that many believe in the enduring capabilities of travel. Now that there’s talk of an Airbnb IPO, this latest fundraising round becomes even more interesting. While the company’s founders originally claimed there were no stipulations in the fundraising about moving toward an Airbnb IPO date, it very well could have been a part of the talking points.

Path to the Airbnb IPO

For most US businesses, the pandemic days have been a rocky road. The same is true with Airbnb, who laid off about 25% of their company in May (for your reference, that’s nearly 1,900 people). 

They’ve since bounced back from the initial shock of the crisis, largely due to an increase in rural, domestic and long-term rentals. In fact, they hit the mark of one million future stays booked on July 8th, which is the first time they’ve been able to achieve this since early March. However, their most recent valuation — measured after that April funding — was $18 billion, almost 42% less than their 2017 valuation.

In 2019, Airbnb executives spoke about plans to go public the following year, but that’s all that was said at the time. Just a couple of weeks ago, reports reignited this talk, stating that Airbnb could be making the move as early as August. As it turns out, that talk was right.

On August 19, 2020, Airbnb announced its initial registration to the Securities and Exchange Commission (SEC), effectively step one in a long-winded IPO process. The form for this is called an S-1, AKA registration statement, which is the first document a company submits to the SEC. 

Airbnb shared an unsurprisingly vague press release officially announcing the submission of their draft registration statement to the SEC. So far, they’re keeping the information within the documents confidential, which means no financial information is available to the public or potential investors. We also don’t know (yet) how many shares will be available, or at what cost.

Next steps for the Airbnb IPO

The IPO process is just that — a process. And Airbnb’s will be no different.

Now that they’ve privately filed with the SEC, the company will soon need to start attracting investors for that first round of capital. Reportedly, Morgan Stanley leads as underwriter, with guidance from Goldman Sachs. These major names in the underwriting business will help propel Airbnb into public territory.

Once the Airbnb IPO date commences, the market will witness a test. Despite their status as a household name, the company heavily identifies with startup culture in tech, which is an undeniably volatile sector. At the same time, many travel restrictions remain in place and the pandemic has yet to lose its gusto in America. And with the California Assembly Bill 5 shuttering contract work from companies like Uber across Airbnb’s homestate, there’s no telling what will happen to other businesses in the sharing economy. 

With all these market factors in mind, it will be interesting to see how the fluctuations pan out — and how willing investors are to risk the plunge. 

When is the Airbnb IPO date?

Just like we don’t yet know the number of stocks that will be available or the price per share, we don’t yet know the Airbnb IPO date, either. But many predict it will happen before the end of 2020 (despite the fact that the 2020 election will be at its climax around the same time). 

So far, they’ve only made the move to file confidentially for status as a publicly traded company, so they still have some steps to take. The SEC’s review process has a reputation for being uncertain in its timing, too.

What investors should know

For investors who are considering taking on an IPO (Airbnb or otherwise), it’s important to look at why a company is going public. There are typically two reasons companies do this — they’re seeking capital to expand through market and research, or they’re looking for money to pay off debt or buy equity from private investors. The latter tends to be a red flag for IPO investors.

It’s hard to say which one Airbnb is at right now, but it’s worth digging into as the prospectus (an SEC document that details their economic standing before the Airbnb IPO occurs) becomes available. If you choose to read the prospectus, keep in mind that the seller writes it in full, which makes it an inherently biased piece of marketing material. Focusing on the data is a good way to go.

Since the COVID-19 pandemic started, IPO news has been pretty quiet. However, the Airbnb IPO is one of many on the move these days. That must mean something for the economy, but investors should still remain aware.

Bottom line

Over the last 12 years, Airbnb has climbed to major heights, landing a role as the largest home-sharing platform in the country. But with the recent struggles of the travel industry, a company once valued at $31 billion is now down to $18 billion. Airbnb is reportedly rebounding strong, and on August 19, 2020, they submitted their draft registration statement to the SEC — the first move in going public. At this time, their filing is confidential, which means we’re waiting on news about the Airbnb IPO date, as well as how many shares will be available and the price per share.

And while we don’t yet know when the Airbnb IPO date will be, the company — with support from Morgan Stanley and Goldman Sachs — will start courting investors any day now. From here, they’re just on the SEC’s timeline.

Justin is the SEO Lead at Public.com

The above content is provided is paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.

Tweet