Almost on command after we asked yesterday if a rash of technology IPOs were about to land, news broke that Airbnb plans to drop its S-1 filing early next week with a December roadshow. The document will be of intense interest for shareholders — as well as public investors who hope to purchase shares in the home-sharing unicorn.
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Per Reuters, which broke the news of Airbnb’s impending public IPO filing, the company intends to raise “around $3 billion” at a valuation that could top $30 billion.
The stock market is rallying before Airbnb’s public filing, making it a good time for the company to seek a rich valuation for itself. But while Airbnb’s recovery from COVID-related lows could become a business case of the ages, it’s not hard to still have questions about what its S-1 will contain.
We know quite a lot about Airbnb’s last few years, something TechCrunch covered here. But, to save you hundreds of words, let’s quickly blast through a rough rundown of its last few quarters. Once we get through that, we’ll ask four questions that, once answered, will help the market price Airbnb’s IPO.
Results, questions
Running back through Airbnb’s numbers without extra conversation, here’s the data in bullet-point format, with percentage-change figures comparing year-over-year data provided when possible:
- Q4 2019: Revenues of $1.1 billion (+32%), EBITDA of -$276.4 million (+92%).
- Q1 2020: Revenues of $842 million and an adjusted loss of $341 million.
- Q2 2020: Revenues of $335 million and an adjusted loss of $400 million.
Turning to more recent times, we know that Airbnb’s financial performance improved in Q3, with data showing the company’s bookings bouncing back as summer ran its course. The company itself has made noise about local bookings (key to its rebound as folks stayed close to home during the pandemic) and total nights booked
This brings us to our first question: Will Airbnb be able to show year-over-year revenue gains? Looking at how far Airbnb fell in Q2 2020 compared to Q4 2019, it’s hard to expect the company to post growth of this nature in Q3 2020. However, if it can, Airbnb’s pre-IPO story won’t be one of ongoing recovery, but of a recovery that has already occurred. The latter, I presume, would be better for its potential IPO valuation.
Will Airbnb be able to show a near-term path to profitability? Airbnb’s losses shot up this summer, but the company also laid off a bunch of staff and cut its marketing spend. As its revenues recovered in Q3, what happened to its profitability? If the company is profitable, that could boost its valuation. If, on the other hand, Airbnb’s IPO hinges on a revenue recovery story and not a near-term return to profitability, investors could balk at a super high price for its equity.
How high-quality is Airbnb’s revenue after the pandemic? This question and our preceding question are closely linked. The higher quality Airbnb’s revenue is in gross margin terms, the better the chance of it being profitable again, or close to it. But the company could be rather unprofitable and still have strong gross margins, provided that its revenue recovery has been slower than what some expect. So, where will Airbnb’s gross margins land and what sort of multiple will they engender from the markets? As a follow-up, are Airbnb’s gross margins better or worse than one year ago, in the pre-pandemic times? Ir Airbnb has managed to refill its revenue bank, but at the cost of higher-margin top line, it could struggle to match its old revenue multiples.
Is there anything lurking in its recent financings that public investors won’t like? And, finally, some worry. Airbnb was smart earlier this year, quickly taking on more capital while trimming costs as COVID slammed its cash flow. Those rapid-fire efforts secured the company’s future, even if its recent — and, we’re sure, welcome — recovery had not come to pass. But I am curious about the terms of the billions that Airbnb took on; did it manage to extract favorable cash infusions, or did it have to bargain; and if so, are there terms in the deals that might irk public investors? We’ll see.
On the whole, I have to admit that I am extremely chuffed about the Airbnb IPO, and, if you made me place a wager, slightly more optimistic about the company’s financial results than not. But, there’s still so much to learn that at this juncture numbers like a $30 billion valuation seem like alchemy more than a concrete target.
More early next week, it seems.
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