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Despite the economic uncertainty caused by the COVID-19 pandemic, 2020 has been a rather active year for initial public offerings, or IPOs, especially in the real estate sector. And the most anticipated real estate IPO could be right around the corner, as vacation rental platform Airbnb is reportedly gearing up to go public.
With that in mind, heres what we know about Airbnbs plans to go public and what it could mean to the investment property owners and homeowners who list their properties on the platform as Airbnb hosts.
Airbnbs IPO: What we know so far
The upcoming Airbnb IPO has been the subject of investor speculation for some time, with Airbnb announcing its plans for a 2020 IPO last year but providing no additional details. However, its now official that an upcoming IPO is indeed in the works. On August 19, Airbnb announced that it had submitted confidential IPO paperwork to the the Securities and Exchange Commission (SEC), officially declaring its intention to go public.
Its important to point out that we dont know many details at this point. For example, Airbnb did not release any of its financials along with its IPO filing. We have no idea how much revenue Airbnb generates or whether its profitable or even on a path to profitability. Investors shouldnt expect to get a look at them until just a couple of weeks prior to the companys actual public listing.
We also dont know when Airbnb shares will make their stock market debut and actually start trading on a major stock exchange. How it works is that the SEC will review the draft Registration Statement Airbnb submitted, at which point the Airbnb IPO (and its IPO date) will really start to take shape.
One other important piece of the puzzle we dont know is the IPO price of Airbnb shares, how many shares will be offered in the IPO, or what valuation the company will have.
The company was valued at about $31 billion in 2017, but this has fallen substantially due to the effects of the pandemic on the business. In its most recent funding round (April 2020), Airbnbs valuation had plummeted to $18 billion.
The main effects of the companys initial public offering are generally on insiders, early investors, and Airbnb backers who will now be able to sell their shares on a public market if they choose to do so or exercise stock options. And the IPO will certainly have an effect on private investors, who will have the opportunity to buy Airbnb shares for the first time. It will also be a major change for the company itself, giving it access to raising money on the public equity markets.
Generally, IPOs have little impact or implications for a companys customers, but there are some exceptions, particularly in cases where those customers actively help the company grow. One notable example is Uber (NYSE: UBER), which not only decided to give its drivers cash bonuses of as much as $10,000 as a driver appreciation reward upon going public but also allowed drivers to buy shares at the IPO price if they chose to do so. Buying shares in an IPO can be challenging for a retail investor -- they often have to wait until the shares actually start trading on the public stock market at whatever stock price supply and demand allows.
There has been speculation that Airbnb could do something similar. In 2019, Airbnb CEO Brian Chesky said, We would like our most loyal hosts to be shareholders. The company expressed a desire to offer shares to hosts while its still a private company, but an SEC rule change would be necessary before that could happen. Even so, the company could choose to do something similar to Ubers share purchase program.
Its clear that Airbnb wants to take care of its hosts during the IPO process, and that is likely to be even more true now after many of its hosts lost tremendous amounts of income during the pandemic. Many hosts werent thrilled with Airbnbs decision to cancel nonrefundable reservations as the outbreak worsened. And allowing hosts to participate in the IPO, and even giving them shares, could go a long way toward repairing a strained relationship.
The Millionacres bottom line
Its certainly possible that Airbnb will allow its hosts to participate in its IPO in one way or another, but just like with the IPO itself, there arent any significant details available at this point. Having said that, it does look like the companys long-awaited IPO is likely to happen later this year, so hosts who are interested in owning a piece of the company should continue to monitor the latest developments.
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