More than a decade after Brian Chesky rented out a room in his San Francisco apartment, Airbnb made it official this week: The hospitality marketplace is going public.
The home-share unicorn, most recently valued at $18 billion down from $31 billion, offered few details beyond confirming it has submitted a confidential filing with the Securities and Exchange Commission. Here’s what else you should know about one of the buzziest IPOs this year.
• Cue the virtual roadshow. Airbnb is planning to do a traditional IPO this year, the Wall Street Journal reported, so we can forget about a direct listing or acquisition by a SPAC (special purpose acquisition company).
• Why it’s good timing. Airbnb has faced pressure to go public from early employees whose stock options are set to expire this fall. But the stock market is up (Apple is worth $2 trillion!) and tech companies Lemonade and ZoomInfo saw their stock soar after IPOs this summer.
• Travel is also picking up. Airbnb lost $1 billion in bookings overnight in March, and in May it had to lay off 2,000 employees, or 25 percent of its staff. But — and it’s a big but — people want an escape during this pandemic. For many, a short-term rental is more appealing than a hotel. Gross bookings in June and July rose to last year’s levels, according to the New York Times.
• Is it profitable? Not currently. Airbnb, which generated $4.8 billion in revenue last year, claimed it was profitable on an EBIDTA (earnings before interest, taxes, depreciation and amortization) basis in 2017 and 2018. But it lost $322 million during the first nine months of 2019, down from a $200 million profit a year earlier. Now, with the pandemic, there’s even more ground to make up. During the second quarter, revenue dropped 67 percent year-over-year to $335 million. First-quarter sales were $842 million, Bloomberg reported.
Airbnb has confidentially filed to go public, following a dramatic dip in revenue as a result of the pandemic.
The home-share startup announced the move in a statement on its website Wednesday, noting that the number of shares to be offered and the price range for the proposed offering are yet to be determined.
Airbnb goes public
Instead, CEO Brian Chesky bought more time by securing $2 billion in debt and equity from Silver Lake and Sixth Street Partners. But the funding came at a price.
Airbnb real estate revenues down
Airbnb was most recently valued at $18 billion, down from an earlier valuation of $31 billion. In May, Airbnb laid off nearly 2,000 employees — roughly a quarter of its staff — after revenue dried up.
Airbnb’s business appears to have roared back to life in recent weeks, as travel resumed. Between May 17 and June 3, bookings topped last year’s volume, according to research firm AirDNA. As of June 17, bookings were up 20 percent year over year.
The company’s public offering will be closely watched: In addition to its falling revenues, Airbnb has a long trail of regulatory disputes it’s been working to address ahead of its debut. Earlier this year, the company reached a settlement with New York City over a longstanding data-sharing dispute. As part of the agreement, Airbnb agreed to hand over listing information about its hosts on a quarterly basis.
Is Boston getting tough on short-term rentals?
It appears so. A Boston Ordinance is being drafted that would require a registration system for all Boston short-term condo & apartment rentals and to impose other stricter limitations.
The Ordinance would establishes three (3) classes of properties:
1. Home Share Units
2. Limited Share Units
3. Investor Units
From Greater Boston Real Estate Website:
The restrictions imposed on short-term rentals depends on the above classifications. Initially, it should be noted that a “Short-term Rental” is defined as the use of a residential unit “for a tenancy of thirty or fewer consecutive calendar days for a fee.” As to “Limited Share Units”, there is no restriction on short-term rentals. “Home Share Units” may be “offered” for short-term rental 365 days per year, but the unit may not be booked for more than ninety (90) days per year. Finally, “Investor Units” may not be offered for short-term rental more than ninety (90) days per year.
In addition, certain units are prohibited from being used for short-term rentals. These include so-called “affordable housing” units, units which are designated as “Problem Properties” or “Public Nuisance Properties”, and residential units which have three (3) or more violations of this Ordinance or of municipal ordinances, noise laws, trash disposal, or similar violations within the past six (6) months. Licensed lodging houses, bed and breakfasts, and units leased to non-profits for temporary housing of medical patients and their families are exempt from this Ordinance. Any “Short-term Rentals” that do not comply with the foregoing restrictions would constitute a violation of the Ordinance.
The Massachusetts Lodging Association cheered the proposed ordinance as a protection against illegal hotels. Other advocate groups are hoping this will elevate some pain from the expensive Boston rental housing market, some public officials have grown increasingly concerned about Boston condos being bought up for the sole purpose of being rented out as short term rentals.
Gov. Charlie Baker has proposed legislation to tax short-term rentals based on the number of days in a year the units are rented.
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