- Airbnb publicly revealed its initial public offering documents on Monday, reporting $2.52 billion in revenue for the first nine months of 2020 and a net loss of $696.9 million during the same period.
- The filing is outside investors’ first look at the company’s finances after it confidentially filed to go public in August.
- The pandemic hit Airbnb hard, forcing it to lay off 25% of its workers, raise $2 billion in emergency funding, and cut its valuation by nearly 50% to $18 billion as booking revenue reportedly declined 72% in the second quarter.
- The company rebounded slightly in recent months, reporting a profit of $219 million in the third quarter, but still faces uncertainty as COVID-19 cases are expected to surge this winter.
- Airbnb has been under intense pressure to go public, especially from employees whose stock options were reportedly set to start expiring this month.
- Visit Business Insider’s homepage for more stories.
After months of anticipation, Airbnb made its initial public offering documents publicly available on Monday, providing the most detailed look yet at the company’s inner financial workings.
Airbnb reported a third quarter profit of $219.3 million on $1.3 billion in revenue, up from a second-quarter net loss of $575.6 million on $334.8 million in revenue as the company saw bookings rebound slightly after plummeting this summer amid the pandemic.
For the first 9 months of the year, Airbnb’s prospectus revealed a revenue of $2.5 billion and a net loss of $696.9 million, down from $3.7 billion in revenue and $322.8 million in losses during the same period last year. Airbnb reported annual revenue of $4.8 billion in 2019.
Airbnb, like the rest of the industry, has been hit hard by the massive decline in travel this year. So far in 2020, travelers have booked 146.9 million nights or experiences through Airbnb, down 41% from the same period last year. Airbnb said that drop was the sharpest in the the second quarter, with bookings down 67% year-over-year, while business bounced back slightly in the third quarter with a decline of 28% from the same quarterly period last year.
The company plans to list its shares on the Nasdaq under the ticker symbol “ABNB,” and will offer an unspecified number of Class A common stock, but the filing revealed the company has a complicated share structure that includes four classes: Class A, Class B, Class C, and Class H.
Morgan Stanley and Goldman Sachs are the lead banks for the offering, through which Airbnb said it’s expecting to raise $1 billion — a likely placeholder number. The startup is reportedly looking to raise around $3 billion, according to The New York Times’ Dealbook.
Airbnb was last privately valued at $18 billion, according to The Wall Street Journal. It confidentially filed to go public in September and enters a red-hot IPO market in what will likely be one of the largest offerings this year.
The company’s decision ended speculation over how the pandemic would affect its IPO timeline, and it will likely alleviate some of the pressure the company has faced for years from employees whose stock options were set to start expiring this month if the company didn’t go public.
Pandemic perils
Airbnb has had a long and at times bumpy road to its IPO, particularly during the past several months as the coronavirus pandemic wreaked havoc on the travel industry. Monday’s filing comes amid record new COVID-19 cases in the US.
When travel restrictions hit in early March, Airbnb’s revenue plummeted 80%, CEO Brian Chesky told Business Insider in September. Bookings in Beijing dropped as much as 96%, according to AirDNA, raising existential questions for the travel giant and forcing it to freeze all marketing spending and nearly all hiring.
Already burning through its cash reserves, Airbnb raised $1 billion in debt and equity financing from Silver Lake and Sixth Street Partners at a steep interest rate of more than 10% and a valuation of $18 billion — down nearly 50% from its previous valuation of $31 billion, The Journal reported. A week later, the company raised an additional $1 billion in debt from the two banks and other investors at a 7.5% interest rate.
As of May, Airbnb still expected its revenue for the year to be less than half of its 2019 earnings, forcing it to take even more drastic measures. Airbnb laid off 1,900 employees — 25% of its staff — and nearly all its contractors, faced backlash from hosts over its early COVID-19 cancellation policies, and paused its investments in ambitious projects around luxury accommodations and producing travel content in order to focus on its core business.
But Airbnb’s business has slowly begun to turn around.
Chesky’s bets on post-pandemic travel trends have so far paid off. He predicted people would flock to rural and local destinations over international tourist traps and big cities, travel more for leisure while using screens for work (instead of the other way around), and prefer private spaces over crowded ones like chain hotels.
Despite second-quarter losses of $397 million, with revenue down 72% year over year, The Wall Street Journal reported in October that Airbnb was on track to turn a profit in its third quarter in a surprising turn. Its Monday filing reveals it did.
Questions remain
While going public may allow Airbnb’s early investors to breathe a sigh of relief, the company still has significant challenges ahead and will be under even greater scrutiny as a public firm.
Investors will be focused first on profitability. Airbnb said it was profitable in both 2017 and 2018 on an EBITDA bases (earnings before accounting for interest, taxes, depreciation and amortization), but year-over-year losses doubled in the fourth quarter of 2019 even before the pandemic hit, Bloomberg reported.
It’s also not clear how well the company will weather the coronavirus pandemic, especially as cases surge ahead of the winter months. While Airbnb has recovered more quickly than hotels so far, according to a study from AirDNA and STR, part of that could be attributable to coronavirus travel trends that aren’t guaranteed to continue as the virus recedes.
Are you an Airbnb insider with information to share? Contact this reporter via encrypted messaging app Signal at (+1) 503-319-3213 using a nonwork device, email at tsonnemaker@businessinsider.com, or Twitter DM at @TylerSonnemaker. (PR pitches by email only, please.)
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