Airbnb Inc. has racked up hundreds of millions of dollars in losses this year, as the coronavirus pandemic has wreaked havoc on the home-sharing company’s business, according to a report in The Wall Street Journal. Citing people close to the company, the company is considering raising capital from new investors, and may alter its plan go public via a direct listing, which wouldn’t involve raising money, the WSJ report said. The company is now considering using an initial public offering to raise cash, but the equity market and its finances would need to stabilize and the virus crisis would first need to stabilize before it can go ahead with an IPO, the WSJ report said. The report added that Airbnb was unlikely to attract investors at its 2017 valuation of $31 billion, when it last raised money.
“Turns out” Airbnb is not a tech company, just like Uber. The advantage that Zoom, Slack and Freetrade have is they’re tech-first companies. @adam @viktor @Ian. I watched an interview with Slack’s co-founder Stewart Butterfield the other day - he was WFH - and he says they’re hiring (for now).
The company’s founders will also be taking on no salary and its executives will take a 50% salary reduction for the next six months.
Now the company faces a travel and tourism industry that has shut down across the globe and is refunding guests for cancelations. The U.S. Travel Association expects the industry to lose 4.6 million jobs this year.
Smart move to freeze spending and re-evaluate things:
They must have a lot of friends and VCs who’ve lived through the 90s and 00s advising them on how to weather this tsunami.
“Only the paranoid survive” - Andy Grove (co-founder of Intel).
Airbnb lowers internal valuation by 16% to $26bn
Exclusive: short-term rental site hit by sharp drop in bookings because of coronavirus outbreak
(Airbnb was last valued privately at $31bn after closing a reported $1bn funding round in September 2017)
The short-term rental site Airbnb, which has had its business hammered by the coronavirus fallout, has lowered its internal valuation to $26bn — a 16 per cent drop compared to its most recent funding round.
The new figure reflects the sharp drop-off in bookings as travellers have been forced to stay home, with estimates suggesting Airbnb bookings were down as much as 90 per cent in the most severely hit markets, according to data from AirDNA, an independent monitoring company.
Staff were told of the new valuation by chief executive Brian Chesky at a company-wide meeting on Thursday, a person familiar with the presentation told the Financial Times.
Airbnb was last valued privately at $31bn after closing a reported $1bn funding round in September 2017. Since then, however, secondary sales of indirect stakes in the company — where buyers gain rights to proceeds from a future initial public offering or sale — have suggested the company may have been worth more than $40bn at the end of 2019, as reported by the FT.
As it looks for more ways to raise capital, Airbnb has held conversations with new and existing investors to consider a late-stage funding round, a source familiar with those discussions said, though no firm decisions have been made.
The company recently met its bankers to request an extension to its $1bn credit line. The company has pulled back all its marketing campaigns in an attempt to save $800m.
Speaking to staff on Thursday, Mr Chesky noted other travel companies had been hit heavily since the impact of coronavirus. The market capitalisations of Expedia, Hilton and Booking.com are down 58, 44 and 37 per cent, respectively.
A person familiar with the Airbnb’s finances said internal projections predict a return to 2019-levels of revenue by next January. The company booked $4.8bn in revenue in 2019, a 35 per cent increase year-on-year, the person said.
However, according to a Wall Street Journal report, the company posted a loss for the first nine months of the year of $322m — costs Airbnb attributed to increased investments in safety and upgrading its systems. Before coronavirus hit, the source said, the company had anticipated that 2020 would see it at least break even, deducting for interest, tax and depreciation.
In an effort to prevent hosts from deserting the platform during the current uncertainty, Airbnb on Monday said it would spend $250m in reimbursing some of the money lost by hosts after they were forced to give full refunds to guests with travel plans disrupted by Covid-19. Airbnb also successfully lobbied for short-term rental hosts to be among the beneficiaries of the US government’s recent $2tn stimulus package.
The valuation drop casts yet more doubt on the company’s stated plan to make its IPO this year, though the company has not yet shared an updated timetable. The push to go public was motivated, in part, by expiring stock options held by staff.
With a fresh $1 billion cheque in its pocket things don’t look as good for Airbnb, as they do for, for example, Slack (a pure tech play) or ZOOM (a video conferencing play). Airbnb is not hiring, but Slack and ZOOM are.
Airbnb looks like tech but it’s nothing without the good old real estate business. Uber Eats is food delivery. Airbnb is a real estate business. WeWork is a real estate business. All dressed up as tech.
Airbnb also had a down round - now valued at $26bn after raising the emergency $1 bn.
They should’ve IPOed at the end of the last decade, like Slack, Octa, Uber, Lyft and everyone else did when people were drunk. It’d be hard to cash out fast now for the early backers and founders.
Uber and Airbnb are reliant on not-so-scalable businesses (home and car owners) to work with them, while they are providing the pipes to connect to the end-users.
Both Uber and Airbnb have cash to burn for now - Uber has a few billion in the form of cash and credit lines, Airbnb - an extra $1 billion from the last round.
What a downround. Airbnb is valued at almost half of what it was before the recent (emergency) $1 billion funding round.
Airbnb Inc. agreed to pay its new investors interest at a rate of more than 10% and to strengthen its leadership, in return for the $1 billion in additional funding announced Monday, according to people familiar with the matter.
The investors will also get warrants that can be converted into shares with a valuation for the company of $18 billion, a drop of almost half since Airbnb’s last fundraising in 2017, the people said.
Airbnb announced on Monday it has raised $1 billion from investors Silver Lake and Sixth Street Partners to help see it through the coronavirus crisis.
According to Bloomberg, the company is still on the hunt for further investment and has held talks of raising a further $500 million to $1 billion. The company is reportedly weighing up different types of debt, from first-lien debt to convertible notes.
The idea behind the extra cash injection would be to give Airbnb a safety net while the coronavirus decimates its business, and to allow it to make potential acquisitions.
Bloomberg’s sources also said the interest rate on Airbnb’s initial $1 billion raise is between 11% and 12%, confirming a Wall Street Journal report that the latest raise came with an interest rate of over 10%.
If AirBNB Wikipedia is right about 12,736 employees then that billion won’t last long. Actually NY Times headline was 6,000 employees. LinkedIn reckons they have 14,561 employees but LinkedIn’s not always correct.
Anyway confusing how they have anywhere that many employees though.
I appreciate how AirBnB reacted to the corona crisis. I had multiple bookings made and they all got refunded in 2-3 days without any issues. Perfect customer service
Easyjet for example has not paid me back for 4 weeks now.
Airbnb don’t own most - if not all - of the property, since they are effectively a hub, like Uber and Lyft or Ticketmaster or LinkedIn Jobs, Glassdoor Jobs and Indeed. EasyJet on the other hand has to generate cash flow from their own leased and acquired fleet. The airline’s expenses are also not just salaries, marketing and rent - they also include operating leases, fuel, “parking” at airports, etc.
So, when Airbnb take care of the refunds for us, it’s because they control the money flow and, as a result, it is the hosts that have recently been forced to refund. Not sure what the policy is on the fees from the platform, but I can imagine it’s also returned as cash or Airbnb vouchers.
However, certain airlines have been more customer friendly than others and - as I experienced myself - refunded everything online without asking.
Check their Careers page - maybe through a some Internet archive site since they’re not hiring as many people as before - and filter by region. Different countries and even cities can have different real estate regulations - so they have to have presence everywhere. And hosts need local support and the HQ needs eyes on the data locally. Plus, Airbnb has a significantly large HQ.
Another $1bn of more senior debt.
A week after reeling in $1 billion in fresh capital, Airbnb is raising another $1 billion in debt as it seeks to pad its balance sheet to get through the COVID-19 crisis, according to people familiar with the matter.
Fidelity, T. Rowe Price and Blackrock are participating in the financing, as well as Oaktree Capital, Apollo Global Management, Benefit Street Partners and Owl Rock Capital, said the people, who declined to be named because the deal hasn’t been made public. Bloomberg was first to report on the financing round.
Airbnb is paying about 9 percent interest on the new debt, the people said. That’s a slightly lower rate than the interest rate on the debt piece of the announced funding round from last week, which was a mix of debt and equity. For the debt portion of that financing, Airbnb is paying about 11.5%. Silver Lake is participating again after also putting money into the prior deal.
The newest round comes with a reduced rate because it’s first lien, meaning the investors will get paid out first in the event of a default. The previous financing was second lien, so investors would get paid later. The equity portion of last week’s deal valued Airbnb at $18 billion, nearly half of what the company was worth in 2017.
“The plane is losing altitude”
It was supposed to be the perfect IPO.
Good is better than perfect.
Airbnb could have gone public in 2018 at a value estimated by its bankers at between $50 billion and $70 billion, according to a presentation from bankers. Mr. Chesky and his two co-founders—Joe Gebbia and Nate Blecharczyk—ultimately opted against it, according to people who were there at the time, believing that Airbnb would perform better as a private company out of the spotlight.
In March, as the pandemic began gaining momentum in the U.S. and across Europe, Mr. Chesky told employees the company still plans to go public this year.
Airbnb’s valuation, in the private secondary market for shares held by early investors, has dropped from $150 per share a few weeks ago to under $90 a share, valuing the company at less than $30 billion. “The plane’s losing altitude,” said Paul Maguire, managing partner of Iron Edge VC, which executes secondary trades. “Early investors are trying to see what kind of luggage they can throw out there to lighten their load.”
When the company was considering a 2018 IPO, its bankers projected it would be profitable by now. Instead, as costs climbed, Airbnb lost $674 million last year, according to company documents.
Brian is good
Mr. Chesky approved the rollout of the new policy: Airbnb would refund any stay booked on or before March 14, with a check-in date between March 14 and April 14. Airbnb later extended the check-in date to May 31. The move was a drastic overhaul of the company’s longtime practice of allowing hosts to set their own cancellation policies and stick to them, no matter what the circumstances.
He didn’t notify board members before making the change, according to people familiar with the situation. Some were miffed they weren’t consulted and felt the decision to pay cancellation fees was hasty, these people said.
Liquidity is fine
Before the recent funding of $1bn plus $1bn, they apparently had another $4bn in the sofa somewhere:
Airbnb told the Journal last month it has a capital cushion of about $4 billion. Nevertheless, its board and investors are increasingly concerned about what happens if the pandemic lasts months longer and the company’s revenues don’t bounce back in the second half of this year.
Covid-19 service fees
If you check the Twitter feeds, the company has also fighting to keep service fees for the services it is not providing and bookings made after 31 May 2020.
Greed is not good
Now the valuation is a fraction of $50bn-$70bn:
Could’ve been worse #wework.
Let’s hope they rebound.
The metrics are bad. Don’t see this changing quickly. Also the article starts with “Brian Chesky is no stranger to big lifts. The 38-year-old former bodybuilder…” to save you a Google here’s his bodybuilding profile.
Alright Freetrade, gotta get on this ASAP please!! This would be the best time to buy AirBnB when they’re struggling <3
haha thanks Sergey! I mean… can you guess what my biggest investment is?
Congrats! It’s a great company and product. Made some money in the beginning of the year when the stock jumped from 400s to above 800s, was expecting to hold it for 3-5 years Would personally wait till the battery day and take out profits at this levels (not an investment advice). The stock turned into bitcoin. At least get out the initial investment.
good points mentioned there!
My take on Tesla is a bit different, but I think I can be considered a “fanboy”, so I’m one of those who believe it’s the Apple of the automotive sector and it will be worth 1trillion+ by ~2030. Not just by the auto business, but they have energy, solar, insurance and probably other businesses we don’t even know about. Elon said I think on the Q1 earnings call that “Tesla should be looked at as a bunch of different technology startups that are vaguely connected and have some things in common”.
And there are investment firms like Ark-Invest who have $7000 base case price targets on Tesla.
But I’m also cautious that so much growth is already priced in, that the stock might not move much in the next 1-2 years. Once Cybertruck is ramped & Berlin & Shanghai are at full capacity, the profits will be in the billions. OR they will just pass them on to the consumer and the cars will be so cheap that other companies will have a real hard time making money.
Lol sorry about that rant haha nobody asked I just listen to way too much Tesla stuff ahhh clearly I’m a fanboi