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AirBnb files to go public amid substantial impact from COVID-19

Airbnb intends to raise public funds through an initial public offering (IPO) in the coming year and has filed its prospectus with regulators in the United States on November 16. The San-Francisco based vacation rental online marketplace, which operates in 220 countries and has booked 825 million guest arrivals leading to revenues worth over $110 billion in the last 12 years, was substantially affected by the COVID-19 pandemic, it said.

“In light of the evolving nature of COVID-19 and the uncertainty it has produced around the world, we do not believe it is possible to predict COVID-19’s cumulative and ultimate impact on our future business, results of operations, and financial condition. COVID-19 has materially adversely affected our recent operating and financial results and is continuing to materially adversely impact our long-term operating and financial results. However, we believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.” — Airbnb S-1 prospectus

Key takeaways

  • Bookings on the platform grew by 29% YoY to $38 billion and revenues grew by 32% YoY to $4.8 billion in 2019. However, due to the COVID-19 pandemic bookings between January and September 2020 fell to $18 billion and revenues fell to $2.5 billion
  • In 2019, the company had a net loss of $674.3 million compared to a net loss of $16.9 million in the previous year.
  • It made $504.9 million in free cash flow in 2018 but due to higher operating expenses, this dropped to $97.3 million in 2019. The free cash-flow position turned negative at $(520.1) million for the January to September period 2020, compared to $319.8 million during the same period of 201
  • In 2019, 84% of its revenue resulted from stays with existing hosts who had completed at least one guest check-in on or before December 31, 2018 and around 69% of revenues in 2019 came from from stays in that year by repeat guests, defined as guests with at least one prior booking
  • As of September 2020, the company had more than 4 million hosts had 7.4 million available listings of homes and experiences, of which 5.6 million were active listings
  • Airbnb estimates that the market opportunity to be worth $3.4 trillion, which includes $1.8 trillion for short-term stays, $210 billion for long-term stays, and $1.4 trillion for experiences.

COVID-19 disruption led to layoffs

In the wake of the pandemic, the company had to lay off 1,900 employees or 25% of its full-time staff and cut all discretionary marketing spends and employee bonuses for the year.  The company also had to raise fresh funds this year totaling $2 billion, half of which came through a syndicated loan, Bloomberg reported in April this year.

As the COVID-19 pandemic disrupted travel around the world. Airbnb says its business model rebounded as domestic and international travel began opening up. “We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform has proven adaptable to serve these new ways of traveling,” it said.

Though the company has not set a date for its stock listing and has not disclosed the quantum of funds it intends to raise, it says it is authorised to offer nearly 4.75 billion equity shares during the IPO. As part of the listing on the NASDAQ exchange, the company will offer three classes of stock Class A, Class B and Class H wherein the company will set aside 9.2 million of non-voting stock aside in an endowment fund for its hosts.

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