When 2020 started, we were extremely excited at the prospect of an initial public offering (IPO) from Airbnb, the online marketplace for vacation rentals across the world. It was one of the most anticipated public offerings of the year. I knew it was going to be huge. There was so much interest surrounding the startup from San Francisco, California… but that was before the coronavirus pandemic.
With most of the world following stay-at-home orders from local governments, no one was vacationing because it was either frowned upon or forbidden. The spread of the virus needed to be controlled. This obviously halted Airbnb’s business and cut off its revenue stream. A company that was on top of its industry had been thrown to the ground by a virus.
I doubt any companies accounted for a pandemic when they were making their 2020 financial plans. No one could foresee what 2020 would bring. But some companies have survived and even thrived in this environment, companies like e-commerce giant Amazon (NASDAQ: AMZN) and household cleaning-supply company Clorox (NYSE: CLX). Clorox was trading at ~$158 per share around mid-March, and as of close on Monday, shares were at $226.78. That's an increase of 43% in less than five months. Shares of both of these companies could easily soar higher as demand continues to surge due to COVID-19.
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As you can imagine, Airbnb had a tough second quarter of 2020. According to Bloomberg, Airbnb’s revenue fell nearly 70% year over year to $335 million. Its losses also expanded to $400 million after a loss of $340 million in the first quarter of 2020. With the pandemic running rampant around the globe, especially the U.S., people are understandably skeptical of paying to stay in someone else’s home or rental — jeopardizing their health for a vacation. Instead, they were panic buying hand sanitizer and toilet paper.
At the height of the pandemic, an IPO was no longer on the table for Airbnb. There were even rumors that the company would postpone its IPO until 2021. During the first few months of stay-at-home orders, the IPO market was very slow. Not many companies were up to the challenge of going public, with so many uncertainties in the market. Most of the companies going public at the time were in the biotech or biopharma industries. The IPO market only started to pick back up a little when some U.S. states began re-opening.
Those companies that took advantage of the spark in the market experienced impressive gains on their first day of trading. The online on-demand car buying and selling company Vroom (NASDAQ: VRM) went public on June 9 at $22 per share and is currently trading at ~$58 per share — a 165% increase. More recently, we saw an IPO from e-commerce company BigCommerce (NASDAQ: BIGC) on August 5 at a price of $24 per share. It is currently trading at around $73 per share — a 207% increase in just a few weeks.
These types of IPO successes could be a driving force behind renewed rumors of a 2020 IPO for Airbnb. There is speculation that the company plans to file its paperwork with the Securities and Exchange Commission this month and that there is an offer for Morgan Stanley to lead the IPO with assistance from Goldman Sachs Group Inc.
Again, these are all speculations. If we get to the end of 2020 and there is still no IPO from Airbnb, it won’t be entirely surprising. This year has been very unpredictable; not to mention, there is a U.S. presidential election in November. It’s hard to be sure which way it’ll go or how the market will react to the results of that election.
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Airbnb is currently valued at $18 billion, a decrease from its $31 billion pre-pandemic valuation. The company will lose even more money if it has to continue dealing with the backlash of COVID-19 and market uncertainties. It's holding onto the hope that everything will soon return to “normal.” News of a COVID-19 vaccine from a biotech company or a new president with a clear plan for how to combat the disease would help bring that normalcy back and allow Airbnb to recover from these hectic months.
Last month in an interview, Airbnb’s CEO, Brian Chesky, said:
“… And then suddenly all global travel basically comes to a near standstill. We took the S-1 document and didn’t file it, we put it on a shelf. And recently, we’ve dusted it off… But we also don’t want to go public if the world’s not ready for us. If people are really nervous about travel, they aren’t clear about Airbnb, then the market’s not ready.”
An IPO from Airbnb appears to be up in the air at the moment. It’s going to depend on if the market becomes more optimistic as society goes back to normal and people start to feel more comfortable with traveling again. When that happens, we could see the IPO from Airbnb that we expected at the beginning of the year.
Until next time,
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