Airbnb publicly reveals IPO filing amid the wave of COVID-19

After months of waiting, Airbnb made its initial public offering documents publicly available on Monday, providing a more detailed look at the company’s internal financial workings so far.

Airbnb reported a third-quarter profit of $ 219.3 million on $ 1.3 billion in revenue, up from a second-quarter net loss of $ 575.6 million on $ 334.8 million in revenue, as the company saw bookings rebound slightly after this summer’s slump in the midst of the pandemic.

For the first 9 months of the year, Airbnb’s prospectus revealed revenue of $ 2.5 billion and a net loss of $ 696.9 million, down from $ 3.7 billion in revenue and $ 322.8 millions of losses during the same period last year. Airbnb posted annual sales of $ 4.8 billion in 2019.

Airbnb, like the rest of the industry, has been hit hard by the massive drop in travel this year. So far in 2020, travelers have booked 146.9 million nights or experiences through Airbnb, down 41% from the same period last year. Airbnb said the decline was the sharpest in the second quarter, with bookings down 67% year-over-year, while business rebounded slightly in the third quarter, down 28% from the same quarter last year.

The company plans to list its shares on the Nasdaq under the symbol “ABNB” and will offer an unspecified number of Class A common stock, but the filing revealed that the company has a complicated share structure that includes four classes: Class A, Class B, Class C and Class H.

Morgan Stanley and Goldman Sachs are the lead banks for the offering, through which Airbnb said it expects to raise $ 1 billion, a probable number of placeholders. The startup is reportedly looking to raise around $ 3 billion, according to the New York Times Dealbook.

Airbnb was last privately valued at $ 18 billion, according to The Wall Street Journal. It was filed confidentially to go public in September and enters a searing IPO market in what is likely to be one of the biggest deals this year.

The company’s decision ended speculation about how the pandemic would affect its IPO timeline and will likely ease some of the pressures the company has been facing for years from employees whose stock options were supposed to start expiring this month. if the company had not gone public.

Pandemic dangers

Airbnb has had a long and sometimes bumpy road to its IPO, particularly in recent months when the coronavirus pandemic devastated the travel industry. Monday’s filing comes among record new cases of COVID-19 in the United States.

Read more: Airbnb’s Brian Chesky says what it was like to see his company’s revenue plummet by 80% in eight weeks and how he decided to go public anyway in an exclusive interview.

When travel restrictions were reached in early March, Airbnb’s revenue plummeted 80 percent, CEO Brian Chesky told Business Insider in September. Bookings in Beijing have dropped by as much as 96%, according to AirDNA, raising existential questions for the travel giant and forcing it to freeze all marketing spending and nearly all hiring.

Already burning its cash reserves, Airbnb raised $ 1 billion in debt and equity financing from Silver Lake and Sixth Street Partners at a strong interest rate of over 10% and a valuation of $ 18 billion, down nearly 50% from the previous valuation of $ 31 billion, the Journal reported. A week later, the company raised an additional $ 1 billion in debt from the two banks and other investors at an interest rate of 7.5%.

In May, Airbnb still expected its revenue for the year to be less than half its 2019 earnings, forcing it to take even more drastic measures. Airbnb has fired 1,900 employees – 25% of its staff – and nearly all of its contractors, has faced backlash from hosts over its first COVID-19 cancellation policies, and has halted its investments in ambitious luxury housing and manufacturing projects. of travel content to focus on its core business.

But Airbnb’s business slowly began to spin.

Chesky’s bets on post-pandemic travel trends have so far paid off. He predicted that people would flock to rural and local destinations over international tourist traps and big cities, traveling more for leisure while using the screens for work (instead of the other way around) and preferring private spaces To crowded ones like hotel chains.

Despite second-quarter losses of $ 397 million, with revenue down 72% year-over-year, the Wall Street Journal reported in October that Airbnb was on track to make a profit in its third quarter in a surprising turn. His filing on Monday reveals that he did.

The questions remain

While the listing may allow Airbnb’s early investors to breathe a sigh of relief, the company still has significant challenges to address and will be under even greater scrutiny as a public company.

Read more: As Airbnb prepares for an IPO amid the pandemic, here are 6 of the company’s challenges that worry investors

Investors will first focus on profitability. Airbnb said it was profitable in both 2017 and 2018 on an EBITDA basis (earnings before accounting for interest, taxes, depreciation and amortization), but year-over-year losses doubled in the fourth quarter of 2019 even before the pandemic, it reported. Bloomberg.

It is also unclear how well the company will withstand the coronavirus pandemic, especially as cases increase ahead of the winter months. Although Airbnb has recovered faster than hotels so far, according to a study by AirDNA and STR, some of that could be attributable to the travel trends of the coronavirus that aren’t guaranteed to continue as the virus recedes.

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