Airbnb prepares to go public

Founded in 2008, the San Francisco-based startup Airbnb is an online platform facilitating peer-to-peer houses and apartments short-term rentals. Airbnb became a market leader in the sharing economy where people can provide and share services without forming fully developed businesses.

With the outbreak of Covid-19, the company’s bookings decreased by 90%, and Airbnb seemed to be on the verge of getting wiped out by the pandemic. Nevertheless, Airbnb is preparing the grounds for an initial public offering.

What are the reasons behind such a decision?

Before the pandemic, Airbnb was at its peak with billions in cash on hand and planned to go public through a non-traditional direct listing.  The aim was to let employees and investors cash out without the need to raise any new money.

By mid-March, Airbnb’s bookings reached rock-bottom.  However, in June, the first signs of a comeback and the increasing number of travelers road-tripping to local vacation rentals encouraged the company to file for an initial public offering.

Many factors actually pushed Airbnb to go public, including:

  1. The fact that trading in the public market is at record highs;
  2. The tension within the company: early Airbnb investors and employees have been waiting way too long to cash out, and some hold restricted stock options that will no longer be valid early next year.
  3. The need to raise additional capital and refinance.

Airbnb did not determine the date it intends to enter the public markets. The company filed its plans with the Securities and Exchange Commission in total confidentiality without disclosing any financial details. The company still hasn’t determined the number of shares it will sell or at what price.

One of the significant challenges Airbnb will have to face while preparing to enter the public markets is to solve the outstanding regulatory issues in some of its biggest markets, such as Paris and New York City. The problem lies in its business model since short-term home rentals are not allowed in these cities. Failure to solve these issues will negatively impact the company’s valuation.

Airbnb is planning its offering after a challenging 18-month period for rising tech startups in public markets. Investors are betting on Airbnb’s ability to adapt to the various crises of 2020 to attract the public markets. While some are cautiously optimistic about Airbnb’s decision to go public, some believe it is a horrible timing for an IPO to be happening.

Hana Khouri