October 30, 2020

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Only an IPO can save Airbnb, but the timing is full …

Only an IPO can save Airbnb, but the timing is full ...

Despite catastrophic quarterly results, Airbnb continues to prepare for an IPO in the fall. In the midst of the corona crisis, it seems like a gamble, but CEO Brian Chesky doesn’t have many alternatives.

Chesky has been talking about plans to go public with Airbnb for two years. In 2008, together with two fellow students, he developed the concept of renting out private rooms or apartments to tourists via a website. The idea turned out to be an immediate success. In a very short time, Airbnb developed into the world’s largest online platform for renting out guests.

This growth was augmented by credit and capital from private investors. It was several million dollars at first, but the amounts rose spectacularly in later rounds of capital. This means that many investors, especially early on, are increasing the pressure to go public on Wall Street. Because an IPO would give them the opportunity to profit from their investment. So there isn’t much choice for Airbnb. If the possibility of a resale does not yet exist, the company may be obliged to compensate the first investors from its own resources.

Bad timing

However, timing for an IPO is very risky. Airbnb sales dropped to $ 335 million from April through June. That was $ 842 million in the first quarter and almost $ 1 billion in the second quarter of last year. Due to the collapse of tourism in recent months, accounting is now in the red. There was a loss of $ 400 million in the second quarter and a little over $ 300 million in the first. 1,900 employees have lost their jobs at Airbnb.

Even so, the IPO is not doomed to fail. Despite the crisis, US investors are pushing Wall Street prices to record levels, with Silicon Valley tech giants leading the way. Airbnb certainly has its supporters in this world.

In addition, the company lives on the hope that it will get better. Brian Chesky announced in late July that the number of bookings on the first weekends of June was even higher than last June. And now that city trips are allowed again, Airbnb is expecting “reasonable” sales figures for the third quarter.

One thing is certain: Due to the corona pandemic, Airbnb is worth a lot less than it was six months ago. The estimated value has fallen from $ 26 billion to $ 18 billion.