In December 2020, Airbnb went public. Investing in the stock market on Airbnb shares during the COVID-19 era was a hot topic and is still relevant today. While this was a huge step for Airbnb just before the pandemic to stop the company’s value from a fall down and use the opportunity to turn a profit, in an interview with CNBC, Airbnb CEO Brian Chesky said:
An IPO became a very obvious path for us. Because ultimately Airbnb is kind of a different kind of company. Not like other companies. And we wanted to have the opportunity to tell our story to as many people as possible. So I think an IPO is a very big way to tell the story to the most number of people.
According to Transparent, “As Airbnb reaches the IPO milestone, the short-term rental industry can no longer be dismissed as alternative accommodations.”
Beyond all the promises of the visionary CEO of Airbnb, the following questions must be asked and answered
- What does it mean when Airbnb goes public?
- Which symbol does Airbnb trade on?
- Is Airbnb stock a good investment?
If you are interested in investing in Airbnb shares or simply wish to know a thing or two about the Airbnb IPO, keep reading this blog post. Here we are going to clarify some of the keywords and must-know facts about the Airbnb Ticker symbol and IPO.
What Is an IPO?
IPO is an abbreviation for Initial Public Offering. IPO is the process in which a private corporation increases its capital by offering shares to the public. In order to hold an IPO, companies need to meet the Securities and Exchange Commission (SEC) requirements. When a company grows and reaches a private valuation of about $1 billion, it can check SEC requirements and go public.
When Did Airbnb Go Public?
The company initially announced its plan to go public in September 2019. According to Investopedia, there are other companies with different valuations that can be qualified for going public. The Conversation said that on 10 December 2020, Airbnb went public.
Why Did Airbnb Go Public?
Brian Chesky mentioned that telling the Airbnb story to as many people as possible was the reason for Airbnb going public. But what else?
An initial public offering (IPO) is a way of raising money that can be used for corporations’ investments and growth. In early 2020, Airbnb management launched IPOs due to the slowing growth of this rental company to control the potential damage to their value. In the details filed by Airbnb in SEC, the idea was to increase additional capital for funding future growth. This strategy brings fresh cash and increases the rental company’s value from public investors.
The Wall Street Journal sees IPO also as a way for early founders of Airbnb “to sell some of their stakes and make money from their initial bets on the startup.”
Here is how Investopedia thinks of the advantages of an initial public offering IPO:
“One of the key advantages is that the company gets access to investment from the entire investing public to raise capital. This facilitates easier acquisition deals (share conversions) and increases the company’s exposure, prestige, and public image, which can help the company’s sales and profits.
Increased transparency that comes with required quarterly reporting can usually help a company receive more favourable credit borrowing terms than a private company.”
What Was Airbnb IPO’s Price?
The price range of Airbnb’s IPO on Nasdaq under the ticker symbol ABNB was US$45-US$50 per share in the pre-marketing phase. This went up to US$55-US$60, and on the day of trading, the IPO price was US$68 per share. By the time of updating this article, NASDAQ: ABNB price is around US$92 per share.
When reaching the price of $144.71 per share, Airbnb received a public market capitalisation of $86.5 billion, while the market cap of Booking.com and Expedia was less than Airbnb. According to Fortune, Nasdaq gave Airbnb a valuation of $100 billion when it went public.
Is Airbnb Stock a Good Investment?
In the travel industry, Airbnb is, undoubtedly, a giant. COVID-19 has affected the entire hospitality industry, but Airbnb is still among the companies with better conditions. There are several reasons why Airbnb hasn’t gone through the crisis that other travel industry companies have. One of the reasons is being a tech-based rental company that supports the ‘belonging anywhere’ motto, which suits the new working from home lifestyle. But more importantly, Airbnb has become a strong brand that has achieved the long-awaited goal of building trust among its customers. That’s why despite the adverse days of the pandemic, Airbnb still owns the biggest share in the market. While the profitability of Airbnb IPO is a very time-sensitive topic, it is still relevant to see the graph below by Transparent that shows guests preferred Airbnb over its competitors and travelled with Airbnb more frequently in 2020.
“In September this year, we calculated that Airbnb took 68% of all bookings on our top 3 OTAs. Of those, 33% went to listings exclusively listed on Airbnb. Booking.com, the closest competition for reservations, counted 25% of the total.”
Airbnb has a dominance over the other competitors which makes its IPO a potential profitable investment.
“First, there is a psychological demand for travel and holidays after a very long lockdown. Second, the availability of cash. A significant part of the working population saved a large portion of their income by not spending on commuting and leisure costs.”
They found this evidence for the profitability of Airbnb IPO in the near future.
Some people do not find investing in Airbnb IPO a wise action. A user of Reddit sees the actual reason for going public was compensating for the impacts of COVID-10 on Airbnb.
Economists at Forbes think:
“Although it’s likely that Airbnb stock will see more volatility going forward given that Internet stocks are falling out with the markets, we think that it could outperform the broader tech space. Despite the current technical factors impacting the stock, we expect Airbnb’s underlying growth to remain solid in 2022, with sales likely to rise by around 25% to around $7.2 billion. The travel and leisure industry is likely to see considerable pent-up demand after close to two years of Covid-19 restrictions around the world, and Airbnb in particular stands to gain, given that its inventory focused on individual homes, is better suited to longer-term stays and social distancing.”
According to CNBC, Airbnb put aside about 9.2 million nonvoting shares for the benefit of the hosts.
“We intend the Host Endowment Fund to be a long-term investment in the future of our host community, to be shaped by hosts for hosts.”
Airbnb sent out emails to some of its hosts to register them for the Directed Share Program. Have you bought any Airbnb shares yet? What do you think is the reason behind Airbnb going public?