Airbnb completely disrupted the travel industry not long ago. I’m assuming you know what Airbnb is, so I’m not going to explain what they do.

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Airbnb was started in 2008 in San Francisco when two roommates put an air mattress in a bedroom and called it a bed and breakfast or BnB. Hints the name Air Bnb. They have over 3000 castles listed and over 1400 treehouses on their site. In 2016, Airbnb launched an “experiences” service that allows travelers to connect with locals and get the experiences usually only the locals know about.

In 2017 an entire country was listed, and that country was Sweden; when an entire country wants to be on your platform, you may be on to something profitable. Every minute of every day, 200 people are checking into an Airbnb. That’s 12,000 an hour. Airbnb was supposed to go public earlier this year in March, and then Roni Roni came through and said, not today.

Pre-Roni, Airbnb was valued at 31 billion dollars. Now they are just a little more than half of that at 18 billion, with 2 billion in new debt. That’s what makes this IPO such a surprise but should also make everyone optimistic about the future of the travel industry.

Bill Ackman of Pershing Square came out and said they were looking for a “mature unicorn” to purchase with their SPAC, tontine holdings. A unicorn in investing terms refers to a private company with a value of over 1 billion. Many of us thought that Unicorn was going to turn out to be Airbnb. I was optimistic after watching what Pershing Square has done with Chipotle. But, after being approached by Ackman, Airbnb said, nah. I take that, thanks but no thanks, that Airbnb is confident that they can handle things on their own by going the traditional IPO route.

Airbnb confidentially filed their IPO paperwork with the SEC or securities and exchange commission in mid-August. The SEC began allowing IPO filings to be confidential in 2017. Unfortunately, because of this confidentiality, we’re still not sure exactly what those financials look like and shouldn’t expect to get a glimpse of them until a couple of weeks of them being listed.

Airbnb has and is rebounding better than its competitors. Booking rates have been up. It has sat better with travelers that many of these Airbnb locations were easier to disinfect and clean than their hotel competitors. Another advantage is the lack of overhead. Basically, it is far cheaper for Airbnb to run than it is a hotel. You have more employees, repairs, etc. Plus, people wanted to go on vacation this year while maintaining social distancing.

Airbnb generated 4.8 billion in revenue last year and claimed it was profitable before EBITDA in 2017 and 2018. But it lost 322 million during the first nine months of 2019, down 200 million in profit for the year prior. During the second quarter this year, and full roni roni lockdown, Airbnb lost 67 percent of year over year revenue.

If you’re an investor, you have to love industry disruptors—for instance, Apple’s iPhone, Tesla cars, Amazon delivery, and Airbnb. Now, what did those first three have in common? They have been extraordinarily successful and have made their investors a lot of money. Anything that disrupts their industry and changes the game is likely to be successful and deserves a look from investors. To put this disruption into context. Airbnb has more than seven million locations and is growing every day.
Wyndham is the largest hotel chain, but with only 8000 locations.

It’s not yet revealed how many shares it plans to offer or the entry price point. And there is always a chance it drops initially, like many other IPO’s. Remember, Facebook had a lot of hype leading up to its date, and then it dropped substantially, only to come back and make their investors a lot of money.

As far as Airbnb, it is to be determined, but it will be determined by the investment bankers in charge of underwriting the IPO.

The share price is determined by the overall valuation of Airbnb, which we know is much lower now than it was earlier this year, how much capital they intend to raise, and how much equity of the company they are willing to give up.

But when they were valued at 31 billion, their share price was rumored to be around 100-120 dollars.
If we’re estimating the possible share price off of these numbers and basing it off of it’s more recent valuation, it would be around $60-$80 per share. But remember, those underwriters could determine a new valuation and don’t forget about the other determining factors, because that could change the share price. Fewer shares mean more expensive, more shares mean less expensive, hints the recent stock splits with apple and tesla.

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