Company / Analytics

Analytics, 20 November 2020

Airbnb going public by December 2020

The holiday season is shaping up to be a celebratory time for tech IPO investors. Food delivery provider DoorDash filed to go public last week while home-sharing company Airbnb, e-retailer Wish, and kids gaming company Roblox are expected to file their prospectuses to go public in the coming days to mark their market debut before the end of the year. Though timings could change based on market conditions, all four companies confidentially filed paperwork with the SEC earlier this year, setting the stage for eventual public offerings. We provide more insights into the Airbnb IPO and other tech listings.

Despite the Covid-19 induced economic crisis, tech IPOs are hot as the sector has outperformed the market in the face of a global pandemic and the uncertainty that followed. The stock rally following the election of Joe Biden provided further incentive for companies that were considering going public to proceed with their plans before market dynamics change.

In addition to Airbnb, DoorDash, Roblox, and Wish, about a dozen other global tech companies could raise at least $1 billion in IPOs being prepared for 2021 as many were waiting to see how the market would react to a Biden victory, according to CNBC.

During the pandemic, software, e-commerce, and gaming companies have been among the biggest beneficiaries of a surge in spending on goods and services that cater to people who are home all day due to the office and school closures. Investors poured money into stocks like Zoom for videoconferencing, Cloudflare for website security, and Etsy for online retail.

Other companies that went public during the pandemic include cloud database vendor Snowflake which raised a record amount of money for a software company, gaming company Unity, software makers Palantir and Asana.

Airbnb IPO

Airbnb is the best-known name of the group that’s preparing to hit the market now, though it also has had the rockiest year. Before the now suspended Ant Group IPO, Airbnb was going to be the biggest tech IPO of the year. But the pandemic put a halt to travel, a core revenue-generating unit for Airbnb forcing the company to cancel more than 1900 jobs or about 25% of its workforce, raise $2 billion in high-interest debt.

The December IPO could value the home-sharing service at $30 billion, according to Forbes. In 2017, Airbnb was valued at $31 billion — but its worth tumbled 42% to $18 billion earlier this year when the company raised a loan as bookings fell during the pandemic.

In recent months, Airbnb has been able to reignite growth as travelers hit the road to seek out vacation homes off the beaten path. According to Airbnb, hosts in rural areas of the U.S. earned over $200 million in June, an increase of more than 25% from the prior year. However, Airbnb’s revenue in the period ended June 30, dropped at least 67% from a year earlier, to $335 million.

Airbnb Outlook

Airbnb typically does the best in the third quarter when people use its service for their summer vacations. 2020’s seasonality was far more challenging than in previous years. For the quarter ending this June, revenue fell 72% and its loss nearly doubled.

Airbnb has lost money every year — its cumulative losses since 2008 total $2.8 billion — and its revenues have been declining in 2020. Yet investors may be willing to overlook those problems because they expect revenue growth to return once the pandemic ends.

Other risks that investors should consider before investing in Airbnb, which we’ve seen several stakeholders advocate for in the recent past include:

There is hope that Covid-19 vaccines will inoculate people in 2021 — which raises questions such as: will those vaccines will be effective? When will the pandemic be brought under control? Will people resume travel as they did before the pandemic? How you answer these questions should determine whether it’s good to buy Airbnb IPO when it lists or you may be better off waiting so you can buy Airbnb stock at a lower price at a later date.

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