Airbnb’s rollercoaster year isn’t over yet, the company is once again considering an initial public offering (IPO) in 2020 after the recent stock market rally surprised the industry.
Development in Airbnb’s IPO Story
Airbnb announced in 2019 their plan to go public in 2020. The beginning of the Covid-19 pandemic put a hold on their expected IPO timeline as their revenue cratered in the face of lockdowns and travel bans.
However, an explosive market rebound could keep the company’s IPO in 2020. The IPO market has picked up in recent weeks as market conditions have improved significantly. This, coupled with a large rebound in short-term rental bookings for the summer, caused Airbnb to re-evaluate their plans.
Brian Chesky, Airbnb’s co-founder and CEO recently said in an interview with Bloomberg, “We’re not ruling out going public this year and we’re not committing to it.”
Direct Listing or IPO?
The IPO market has seen an upswing as the stock market no longer seems tethered to the economy and financial performance, according to Axios. This has led to a wide range of companies doing IPOs. Music label Warner Music Group, SaaS company ZoomInfo, and online car sales company Vroom have had successful IPOs recently.
Companies are getting a pass on weaker recent performances. Many investors are using 2019 financial statements to model 2021 financial growth, viewing pandemic-related financial distress as an inaccurate indicator of a company’s true financial stability.
While Airbnb has declined to comment on its IPO plans, there is a growing consensus that going public in 2020 is a stronger possibility. With little visibility into Airbnb’s finances, those in the industry continue to speculate how Airbnb will go public — direct listing or IPO.
If raising cash is the strategy, Airbnb might consider an IPO — the company recently secured expensive financing of $2 billion to stay afloat through the coronavirus crisis. According to CNBC, $1 billion of this debt is at 9% interest and the debt portion of the other $1 billion is at 11.5% interest.
The company has also implemented cost-cutting measures in recent months, including a 25% workforce reduction. These measures, combined with the company’s recent $2 billion funding round might mean that Airbnb would not need additional money. Going public through a direct listing would help Airbnb avoid the high costs of an IPO, especially if they are not looking to raise additional capital.
Covid-19 is still circulating through the world’s population — and it has caused a great deal of change in a very short amount of time. It’s difficult to predict where Airbnb, or even the world, will be in a few months time.
photo credit: airbnb