(Noted News) — After years of putting off an IPO, Airbnb has finally decided to offer their home-sharing marketplace to the public via the Nasdaq next month. The IPO will come 12 years after the founding of the company by CEO Brian Chesky and his former roommates Joseph Gebbia and Nathan Blecharczyk.
Chesky and his circle previously went against investors’ advice to go public in order to build out the company’s platform, namely the “experiences” section of Airbnb that connects users with local guides and experts to provide activities for travelers when they reach their destination. On top of building out the “experiences” platform, Chesky wanted to go much further and develop Airbnb movies and television shows.
The IPO prospectus shows that the expansion, though making the platform more interesting, ended up slimming the company’s profits. Presumably, Chesky has decided to put these projects on hold to focus on the long-anticipated public offering.
Ron Conway, the founder of SV Angel and an early investor of Airbnb, said that “Chesky is one founder where it wasn’t his dream to go public but it’s part of the process of satisfying all your stakeholders and rewarding them.”
Just like everyone else, Airbnb has felt the burn of the coronavirus restrictions, with a slowing of growth and a significant drop in revenue from $1.1 billion in the last quarter of 2019, to $841.4 million in the first quarter of 2020, to $334.8 million in the second quarter.
“It is not yet clear what financial impact the severe travel reduction occurring during the COVID-19 pandemic will have on these individuals or whether they will be able to keep their homes or operate their businesses as travel resumes,” Airbnb said in its filing.
When summer arrived and the home office culture started taking off a bit more, Airbnb’s revenue made a nice rebound to $1.34 billion in the third quarter of this year, but are still on track for a much slower than usual year.
Originally, Airbnb was supposed to IPO with a market capitalization of $50 billion, but after the failed expansion and the weathering of the pandemic, Airbnb will be hitting the open market with a cap of $30 billion instead. Besides the prospectus, no one from Airbnb has made any comments.
The loss of market cap was not Airbnb’s only drama on the road to this IPO. In 2017, Airbnb’s CFO Lawrence Tosi raised $1 billion from investors right after telling them the company would most likely go public in the next 12 months. He had also begun negotiating with investment banks about the would-be $50 billion IPO and was doing all of this under the command of CEO Chesky.
When Chesky halted all of the IPO preparations, it caused some tensions between Chesky, Tosi, and the circle of investors who felt misled. Tosi always believed, evidently correctly, that Airbnb would have been better off focusing on the core moneymaker of vacation rentals and business travels. Tosi eventually left Airbnb in 2018.
To survive coronavirus and keep the IPO on schedule, Airbnb had to secure very pricey debt from a number of investment firms, such as Sixth Street Partners and Silver Lake, at an average annual interest rate of 9%.
Airbnb’s filing names several general business expenses to spend the new capital on, as well as the intention of additional investments and/or acquisitions.
“The principal purposes of this offering are to increase our capitalization and financial flexibility and to create a public market for our common stock.”
“We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire or make investments in businesses, products, offerings, and technologies, although we do not have agreements or commitments for any material acquisitions or investments at this time.”
Though set for early December, an exact date for the IPO has not been set.