Last Monday, Airbnb filed for its initial public offering (IPO). The company has put out feelers about its IPO for a few years now, however, the timing was never quite perfect for it. At the beginning of the year, Airbnb had almost committed to going public. Then the coronavirus and its spread throughout the world ushered in months of market volatility. With so many uncertainties surrounding the virus, most of the world went into lockdown to prevent further spread.
Naturally, that put Airbnb’s IPO plans on the backburner as it and other companies waited for a little more understanding about the virus and to see if markets would be receptive to public offerings. Last week, I talked about DoorDash and how it adjusted its IPO plans because of COVID-19.
It was supposed to be a big year for the IPO market. I remember writing about what we could expect from 2020’s IPO market around this time in 2019. I don’t think a contagious virus was on anyone’s mind then.
However, it wasn’t a total bust for the 2020 IPO market. One hundred ninety IPOs were priced. According to Renaissance Capital, total proceeds were about $67.6 billion this year, up 55.1% from last year. Additionally, companies filed 242 IPOs this year, up 22.8% from last year.
Things began to pick back up in the summer months, with several successful IPOs. They may not have been those highly anticipated few from 2019, but it was still good to see some movement within the market. Now it’s almost the end of the year, and we’re hearing that companies like DoorDash, Airbnb, Affirm, and Robinhood are all considering going public very soon. We know that DoorDash and Airbnb have already filed their S-1s with the SEC. So, since I talked about DoorDash last week, this week I’ll take a look at Airbnb’s upcoming IPO.
Airbnb and the COVID-19 Effect
The coronavirus has obviously had an enormous impact on the world. You can’t turn on the news without hearing about it, and you’ll find a similar focus in Airbnb’s IPO filing. The word “COVID-19” appears in the company’s prospectus about 215 times. Airbnb will continue to be affected by COVID-19 because it operates in the travel industry. The company offers travelers a marketplace of accommodations, where they can browse homes, apartments, extra spaces, etc. to rent.
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With Airbnb’s business solely in the travel industry, the travel restrictions brought about because of COVID-19 eroded the company’s financials. Its revenue decreased by about $2.5 billion in the first nine months of 2020. Its net losses rose from $322 million to $696 million. Its net cash from operating activities also took a hit — from a gain of $419 million to a loss of $490 million during the same period.
This has been difficult for Airbnb because it was already dealing with considerable debt before the pandemic. In April, it took on an additional $2 billion in high-interest debt. While its financial situation appears grim, the business did see a slight uptick during the summer months when some countries lifted restrictions and people began to travel to rural areas to vacation or simply work from home.
Airbnb IPO Details
Airbnb filed its IPO prospectus with the SEC on Monday, November 16. It plans to list on the Nasdaq under the ticker symbol “ABNB.” It’s reportedly aiming to raise about $3 billion, which would put the company’s valuation near $30 billion.
Airbnb’s financials are not the best at the moment — COVID-19 travel restrictions will continue to hamper its business, and while the travel industry should pick back up once there’s a vaccine available to everyone, travelers could still be hesitant to book that ticket. The upside, though, is that Airbnb’s 2020 financial results are a lot better than other companies in its industry, like Delta (NYSE: DAL) or Hilton (NYSE: HIL). But, when all is said and done, the travel industry will rebound, and getting in on Airbnb before that happens could have its benefits.
It’s still a little too soon to take a definitive stance on this IPO’s prospects, but we should gain more understanding as we creep into December.
If you’re interested in learning more about IPOs, IPO news, and upcoming IPOs like the one we’re expecting from Airbnb, click here.
Until next time, Monica Savaglia Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.
