A group representing 45 housing associations has written to the chairman of the SEC questioning Airbnb’s IPO disclosures.
The group, describing itself as a global coalition, led by Fairbnb Canada and ShareBetter SF, said that many of Airbnb’s public descriptions of its business model, practices, and operations were at odds with independent analysts and “often at odds with reality”.
The group said that there were a number of issues that were important for potential investors to understand, calling on the SEC to address them.
Issues named by the group included disclosure of risks, citing moves by jurisdictions around the world to limit short-term rentals.
The group used the example of Paris, commenting: “With more than 60,000 listings, [Paris] is Airbnb’s largest market in the world. City officials estimate that as many as half are illegal, and the city issued $14m in fines to the company for illegal advertisements this past year. The data are similar for other major Airbnb markets around the world – Barcelona, London, Amsterdam, Singapore, et al.
“A substantial portion of Airbnb’s current revenue is derived by facilitating illegal short-term rentals in these and other markets. As more cities adopt mechanisms that effectively enforce existing laws and regulations, an increasing percentage of Airbnb’s revenue is at significant risk.”
It added: “Furthermore, in the past year, private market valuations of several high-profile companies were proven to be grossly inflated once their securities began trading publicly. Uber and Lyft, for example, are today both valued well-below their initial public offering prices. After investors reviewed the disclosure documents of We (parent company of WeWork), the company’s private valuation of $47bn dropped by 80% and its scheduled initial public offering was scrapped.”
The letter questioned the platform’s efforts in attempting to ban ‘party houses’ commenting: “It seems the only way to effectively ban parties in Airbnb rentals is to require that operators be onsite throughout the rental term, to ensure that renters abide by the company’s ban. Absent an operator’s presence, any unit of any size can be used as a ‘party house’ (or brothel or porn film set).
“That, however, directly contradicts Airbnb’s current marketing initiative promoting ‘whole-home’ rentals - where the operator is not present – as an alternative to staying in hotels. If that effort is successful, the number of parties – and associated violence – in Airbnb rentals will continue escalating.”
The letter concluded: “We are following the Airbnb public offering with keen interest. Given the corporation’s many past misrepresentations of its business model and practices, and its ongoing promotion of policy pronouncements that have little if any effect on the deleterious impacts it brings to neighbourhoods and communities, we have no confidence that Airbnb will provide a thorough, honest accounting of its finances and assessment of its risks. It is therefore incumbent on the Commission to compel Airbnb to fully and truthfully provide all information relevant to investors, in order for them to make informed judgements about the company’s valuation and prospects.”
There was no immediate response from Airbnb.
Insight: We all want to take a look at Airbnb’s IPO filing, it’s true and the hope is that one glorious day we will. And if writing letters to SEC chairman Jay Clayton would get us there, hand over the quills.
One of the reasons which it would be great to get a look at the filing is because it might give clarity on what Airbnb is considering strategy at the moment. Earlier this year it wanted to go longterm - students and the like - then the pandemic summer played to its traditional home-rental strengths. It’s one thing to ask for the SEC to check on Airbnb’s disclosures, it would be grand just to get a look at them.
The issues raised here are nothing we haven’t seen before - although talking about the valuation of Lyft and the failed We IPO is a left-of centre move - and the issues around ongoing legislation which may limit Airbnb’s growth has been long factored in by investors.
The question of whether Airbnb limits long-term rental markets is open to nuance. The rise in properties available in markets including London at the start of the pandemic was attributed to a drop in Airbnb listings but local governments love to whip the platform when the problem is often a failure of those in power. Many of these problems could be resolved with registration and the transparency it would bring.
But Airbnb, as we have seen by its lack of disclosure so far into its IPO process, is not one for transparency. The same is true of its opponents. Of the 45 signatories, many of them were legitimate tenants’ advocacy groups. Many of them were also being supported by hotel groups: Fairbnb counts Silver Hotel Group and the Ottawa Gatineau Hotel Association as ‘coalition members’. Hotels have a dog in this game and it’s not all hand wringing about the rental market. Whatever Airbnb is, hotels clearly feel it’s still a threat.