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How to trade the Airbnb IPO
You can trade the Airbnb IPO in two ways with IG Bank:
Before the IPO
You can speculate on Airbnb’s share price via our grey market.*
The price of our grey market is a prediction of what Airbnb’s total market capitalisation will be at the end of its first day of trading.
- If you think that it will be worth more than the price indicated, you can ‘buy’ the market.
- If you think that the price is an overvaluation, you can ‘sell’.
*The grey market for Airbnb will be available later in the year.
Airbnb's grey market
|Airbnb grey market||$2||$10||10||25%|
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When is Airbnb’s IPO?
One of Airbnb’s co-founders, Nathan Blecharczyk, has said that Airbnb has taken the necessary steps to go public this year, but that it does not want to go ahead quite yet. The ‘no rush’ mentality is seemingly because the company does not need a major cash injection to stay afloat. It is may also be reluctant to proceed after its Chief Financial Officer resigned in February 2018 due to internal tensions.
What is Airbnb likely to be valued at when it lists?
According to internal valuations, Airbnb is likely to be valued at around $38 billion when it lists. This surpasses a previous valuation of $31 billion. However, this figure may be distorted due to media hype, and it may not reflect the true value of Airbnb stock to the customer.
When the Airbnb listing is confirmed – and if the 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 $7.4 billion, Expedia at $18 billion, while Booking.com takes the lead at $80 billion.
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, which is currently estimated at $38 billion, the investment bank will use established valuation techniques to determine how many shares will be offered, and for how much money. After the IPO, the share price will be determined by normal factors affecting supply and demand.
Why is Airbnb listing?
Airbnb is not in a rush to list its stock. Most companies decide to go public to raise funds, but it seems that Airbnb does not need the capital nor the boost in reputation. Profits are stable, and it has managed to get enough funding from private investors. If it needs more, banks will be happy to provide. So why is Airbnb even considering an IPO?
CEO Brian Chesky has confirmed that it has an obligation towards employees to go public before the employees’ stock grants expire, but recent reshuffling within the business has put the brakes on an immediate public offering. Interestingly, Chesky also signalled intent that Airbnb might want to undertake a direct listing, rather than an IPO. This comes after the success of Spotify's direct listing.
Who are Airbnb’s current investors?
Airbnb’s current investors are CapitalG, TCV, FirstMark, Sequoia Capital, and dozens of other notable individuals and businesses. In total it has 53 investors, of which 12 are lead investors and from which it has raised $4.4 billion in funding. Manhattan Venture Partners and K3 Ventures are the most recent Airbnb financiers.
What’s the outlook for Airbnb?
Airbnb has had major success since its launch in 2008. And, with $5 billion in the bank, the outlook is bright. To remain competitive in the industry, the company is working on diversifying and expanding its platform to include complimentary travel services. Plans also include launching a loyalty programme, attracting higher quality hotels, and creating a corporate travel business. The CEO revealed that Airbnb is even considering launching an airline.
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 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 guests and travellers.
The accommodation listed by Airbnb ranges from private homes to hotel rooms, and even novelty lodges such as treehouses. There are listings in over 81,000 cities in 191 countries to choose from. Besides accommodation, a small part of the business focuses on restaurant and experience bookings. Airbnb Experiences offers users more than 25,000 local activities to choose from when they travel.
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 is outperforming many of its peers and has made a profit for two consecutive years (2017 and 2018). During the early years, the company reported a very healthy growth rate of between 150% and 300% a year. In 2013, nearly 250,000 properties were added to Airbnb and revenue started growing at an incredible pace – almost 1000% between 2013, when it was $250 million, and 2017, when it reached $2.6 billion.
In 2017 it posted a $93 million profit from its $2.6 billion income, and in the third quarter of 2018 it raked in more than $1 billion. Final revenue and profit figures for 2018 have not yet been released.
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, and none of them have released an initial public offering. As for online travel sites, Airbnb shares the limelight with the likes of Booking.com, which does sell shares to the public.
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 6 million – Airbnb also has more (and less conventional) options to choose from, such as castles, boathouses and treehouses.
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How do IPOs work?
IPOs are released when a company decides to start selling its shares to the public. The company will decide how many shares it wants to offer, and the investment bank will decide on the initial price of the stocks based on supply and demand.
1Based on revenue excluding FX (published financial statements, February 2018).