Despite an ongoing pandemic that has put a damper on travel and tourism and led Airbnb to lay off 25% of its staff, Airbnb is going forward with an IPO in 2020.
Despite an ongoing pandemic that has put a damper on travel and tourism and led Airbnb to lay off around 1,900 people, or 25% of its staff, the tech unicorn is going forward with an IPO in 2020.
The company announced its intentions to go public in 2019, stating at the time that "it expects to become a publicly-traded company during 2020."
This week, it announced that it had confidentially filed a draft registration statement with the US Securities and Exchange Commission (the “SEC”) so that it can go public. Details like the total number of shares and the sale price of stock have not yet been determined.
COVID-19 takes its toll
Originally, CEO Brian Chesky had intended to file for an IPO on March 31st, but the coronavirus pandemic had rendered those plans null.
COVID-19 also put a major dent in earnings.
According to company insiders Bloomberg spoke with, Q2 2020 revenue (period ending June 30) dropped to $335 million, representing a 67% decrease from the more than $1 billion the company reported in the same period last year. It’s also a steep decline from the $842 million in sales in Q1, according to financial information viewed by Bloomberg.
Losses from Q2 reached $400 million, while Q1 losses (adjusted) were $341 million in the first quarter, compared with a loss of $292 million a year earlier, Bloomberg's report continued.
However, Airbnb numbers were suffering even prior to the pandemic, with their losses almost doubling during Q4 of 2019 year-on-year. The company reported a loss of $276.4 million EBITDA, compared with a loss of $143.7 million a year earlier.
Additionally, the home-sharing company has seen its valuation nearly half from $31 billion at its peak in 2017 to a recent valuation of $18 billion.
Airbnb had previously been an exception to the loss-making trend of tech unicorns like Uber and Slack, reporting profitability in 2017 and 2018.
However, it's not all doom and gloom for the company. The IPO filing shows the startup is confident and the announcement has actually come earlier than expected.
Additionally, with lockdown restrictions having begun to ease around the May-June period as major cities had learned to co-exist with the virus, Airbnb saw an uptick in business. Travel and tourism turned inward as opposed to outward and cross-border, and 'staycations' were picking up steam. In fact, from May 17 to June 6, 2020, there were more nights booked for travel to Airbnb listings in the US. than during the same time period in 2019, the company revealed in a June press release.
As the sector continues to make a recovery, this IPO is likely the a sign of greater things to come for the San Francisco firm.
What is a confidential IPO filing?
There has been a trend of US companies opting for confidential filings as of late. Lyft and Uber both filed for confidential IPOs in late 2018.
As opposed to a direct listing, confidential IPOs allow companies to have more control of their information and the eventual offering, preventing competitors from having detailed insight into their operations.
"Essentially, the confidential IPO gives more power to companies as they prepare to go public," Shawn Cole, President and Founding Partner, Cowen Partners, writes for Forbes. "They can avoid being victims of a capricious market and can file on their own terms. They are also able to keep leaks to a minimum and reduce media scrutiny as they are preparing to go public."