Airbnb has estimated that its IPO price will be between $44.00 and $50.00 per share, giving it a valuation of $35bn, up from a previous peak of $31bn.
In a filing the company said that it planned to raise about $2.5bn through the offering, with part potentially earmarked for acquisitions.
The company is due to start its roadshow on Tuesday. Existing investors seek to sell $96m worth of stock in the IPO.
Earlier this year Airbnb saw its valuation cut to $18bn after Silver Lake and Sixth Street Partners invested $1bn in the platform in a combination of debt and equity securities. Reports suggested that the company was paying 10% in interest plus Libor on the deal.
Shortly afterwards Airbnb announced a $1bn syndicated term loan from institutional investors,
Airbnb co-founder Brian Chesky said that the money meant rather than, rather that “merely hunkering down”, the company would “continue moving forward”.
It was thought that private equity firms Silver Lake, Apollo Global Management, Sixth Street Partners, Oaktree Capital Management and Owl Rock participated, with the loan priced at an interest rate of 750 basis points over the Libor benchmark.
Chesky said: “We know travel will return and rather than merely hunkering down, the support we have received will allow Airbnb to continue moving forward as we invest in our community. All of the actions we have taken over the last several weeks assure that Airbnb will emerge from the storm of the pandemic even stronger, regardless of how long the storm lasts.”
Airbnb used its IPO prospectus to accuse the travel industry of “offering standardised accommodations in crowded hotel districts”.
The platform said it had identified a market worth $3.4 trillion, including $1.8 trillion for short-term stays, $210bn for long-term stays, and $1.4 trillion for experiences.
Airbnb said: “Travel is one of the world’s largest industries, and its approach has become commoditised. The travel industry has scaled by offering standardised accommodations in crowded hotel districts and frequently-visited landmarks and attractions. This one-size-fits-all approach has limited how much of the world a person can access, and as a result, guests are often left feeling like outsiders in the places they visit.”
Looking at performance during the pandemic, Airbnb said that, in early 2020, as Covid-19 disrupted travel across the world, business declined “significantly”, but had started to rebound within two months, even with limited international travel.
It added: “People wanted to get out of their homes and yearned to travel, but they did not want to go far or to be in crowded hotel lobbies. Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home. Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere.”
Airbnb drew attention to the likely impact of the pandemic on supply growth, commenting: “Just as when Airbnb started during the Great Recession of 2008, we believe that people will continue to turn to hosting to earn extra income. We believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people”.
It added: “Our hosts largely come to us organically with 79% of our hosts coming directly to our platform to sign up to host in 2019. In 2019, we added more hosts than any year in our history with 23% of our new hosts first starting out as guests on Airbnb.”
As of 39 September Airbnb had over 4 million hosts around the world, with 86% of hosts located outside the US. There were 7.4 million available listings of homes and experiences as of 30 September of which 5.6 million were active listings ie have been previously booked at least once on Airbnb.
The group reported adjusted Ebitda of $60.0m, $170.6m, $(253.3)m, and $(230.2)m for the years ended December 31, 2017, 2018, and 2019 and for the nine months ended September 30, 2020, respectively.
Gross nights and experiences booked contracted on a year-on-year basis, with a low in April 2020, down 72%. From April through June 2020, there was rebound in gross nights and experiences booked before cancellations and alterations, down 21% in June against 2019. From July through September 2020, gross nights and experiences booked were stable, down approximately 20%.
Airbnb has incurred net losses in each year since inception; $70.0m, $16.9m, $674.3m and $696.9m for the years ended 31 December 2017, 2018, and 2019, and nine months ended 30 September, 2020, respectively. The group’s accumulated deficit was $2.1bn as of 30 September.
Professor John Colley, associate dean at Warwick Business School, said: "The risks are significant. Airbnb still makes substantial losses after 12 years and was effectively rescued from Covid in April 2020 with $2bn from private equity. Clearly the backers are looking for a rapid sell out and profit.
"Airbnb has been spending significantly to increase growth rates ahead of the IPO and attempting to reduce the criticisms in relation to safety, fraud and product descriptions.
"Airbnb continues to face competition from Booking.com, Expedia, Google and a host of others in what are becoming very competitive markets. Future growth is likely to be narrow margin with head on competition from Expedia and Booking.
"There are also governance issues with the three founders requiring 20 votes for each of their shares against 1 for subscribing shareholders. Weak governance often results in badly run business. Certainly the non founder shareholders will not have much of a voice.
"No doubt the IPO will be a success in view of the current investor appetite and the fact that Airbnb is nearer to profit than many recent and current IPOs. However shareholders may well find the future a turbulent ride.”
Insight: If you’ve borrowed a lot of money and you need to pay back a lot of money then you need to be worth a lot of money and that’s how that is, Harvard MBA not required.
This is a leap since the early days of the pandemic, when Airbnb was loading up with expensive cash and talking about how it was looking to get into long-term and student housing. Then the pandemic came along and in those windows of travel which were allowed, fatigued consumers sought out remote locations they could clean themselves and, while Airbnb may not have had a boom year, it did a lot better than many hotel counterparts.
It’s still not clear what Airbnb’s long-term or even medium term strategy is, but there appears to be no shortage in appetite for its shares from eager investors looking to make a buck from hospitality, with few other likely investments. And few others can claim to have almost doubled their value during a pandemic.