Airbnb's grey market
|Airbnb grey market||$1||$10||4||25%|
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When was Airbnb’s IPO?
Airbnb's IPO was on 10 December 2020. The company first filed its listing in November 2020.
The company was originally expected to list much earlier in 2020, but had to put its plans on hold when bookings and revenues fell dramatically as a result of the coronavirus pandemic. Airbnb has since let 25% of its staff go to cut costs, and diversified to offer a range of online experiences.
What is Airbnb likely to be valued at when it lists?
It is not yet known what Airbnb’s value will be when it lists. Its most recent funding round in April 2020 saw it raise $1 billion at a pre-money valuation of $17 billion, so it is likely to target a valuation above the post-money figure of $18 billion.
However, any valuation close to this level would be much lower than pre-coronavirus estimates. That’s because private investors were reportedly trading indirect stakes at prices that valued the company at closer to $42 billion in November 2019.2
Despite this – if the April 2020 valuation remains unchanged - Airbnb will have one of the largest market caps in the hotel and online travel agency industry. TripAdvisor is currently valued at $2.98 billion, with Expedia at $11.96 billion. However, Booking.com takes the lead at $72 billion (All figures correct as of 12 August 2020).
What could the Airbnb share price be when it floats?
It is not yet known how many shares Airbnb will offer to the public, or at what price. Once the company decides to go ahead with its IPO, its chosen investment banks will use established valuation techniques to determine how many shares will be offered, and for how much money. In this case, Airbnb is said to be working with Morgan Stanley and Goldman Sachs to launch its IPO.
After the IPO, the share price will be determined by normal factors affecting supply and demand.
Why did Airbnb list?
Airbnb didn’t issue a public statement on the reasons for the listing, but it could be that the company wanted to cash in on increased interest in the IPO market following successful listings by Warner Music Group and Lemonade earlier in the year. Further, some employees and investors are in a hurry to cash out before their stock options expire.
The company may also require a further cash injection to see it through the coronavirus crisis, having cut revenue expectations on the back of reduced demand for holiday accommodation worldwide.
Who were Airbnb's investors ahead of the IPO?
Airbnb’s investors ahead of the IPO were Silver Lake, Sixth Street, CapitalG, TCV, FirstMark, Sequoia Capital, and dozens of other notable individuals and businesses. In total it had 57 investors, of which 14 were lead investors and from which it has raised $5.4 billion in funding. Silver Lake and Sixth Street were the most recent Airbnb financier before the company completed its IPO.
What's the outlook for Airbnb?
Airbnb has had major success since its launch in 2008, quickly becoming one of the travel industry’s dominant players. However, revenue forecasts have suffered in the short term as a result of the coronavirus pandemic, which has caused demand for holiday accommodation fall dramatically this year.
To remain competitive, Airbnb has been working to diversify its offering to include complimentary travel services and experiences in recent years – including online experiences in 2020. Plans also include launching a loyalty programme, attracting higher quality hotels, and creating a corporate travel business.
By the year 2022, experiences, transportation and other unexplored segments could make up a considerable part of the business – even though it may still rely heavily on accommodation to create revenue.
What's is Airbnb's business model?
Airbnb’s business model is based on helping travellers to book privately owned accommodation online. It acts as a broker between traveller and property owner – allowing the owner to list their space for rent and connecting them to the traveller. Airbnb also manages payments, acts as a mediator in the case of grievances, and lists reviews of both hosts and travellers.
The accommodation listed by Airbnb ranges from private homes to hotel rooms, and even novelty lodges such as treehouses. There are over 7 million listings in over 220 countries and regions to choose from. Besides accommodation, the business also offers restaurant and experience bookings – an area that has seen increased focus this year as a result of the coronavirus pandemic. Users can choose from more than 50,000 activities, many of which can be experienced online.
The strength of the Airbnb business model lies in its competitive pricing, the unique user experience and its huge global presence.
How has Airbnb been performing?
Airbnb has been performing poorly in 2020 compared to previous years, as a result of the coronavirus pandemic. Chief executive officer (CEO) Brian Chesky announced a 25% staff cut earlier in the year to reduce costs, stating that he expected revenues to be less than half of 2019 figures ($4.8 billion).
While the company does not release earnings reports, recent estimates suggest that Airbnb made a loss of $322 million in the first nine months of 2019 with costs spiralling as it sought to expand its offering. However, the company is said to have made a profit in the two previous years as a result of rapid growth.
How the company performs in future years will depend on how quickly the coronavirus crisis comes to an end, and also how popular its experiential offering proves to be. Revenues are likely to grow rapidly once demand for holiday activities and accommodation begins to return to pre-Covid-19 levels.
Who are Airbnb's biggest competitors?
Airbnb’s biggest home-sharing competitors are HomeAway, VacayHero and HouseTrip, to name a few. However, Airbnb’s presence across the globe far outweighs any of these companies. As for online travel sites, Airbnb shares the limelight with the likes of Booking.com.
While there are many similarities between Airbnb and other home-sharing services, it remains the forerunner in the market. Besides having more rooms listed than the top five hotel groups combined – a staggering 7 million – Airbnb also has more (and less conventional) options to choose from, such as castles, boathouses and treehouses.