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[JohnCM]

Airbnb's IPO will cap off its resilient rebound

Nov 15, 2020
Dan Primack, author of Pro Rata
Axios

Airbnb will flip its IPO filing on Monday afternoon, setting itself up to go public before year-end.

Why it matters: This would cap off a resilient rebound for a company that many left for dead after the pandemic hit. As a source close to the company tells me: "Everyone knows Airbnb had a good Q3, but people may be surprised by just how good it was."

What to expect: This will be a traditional IPO, not a "hybrid" that includes some sort of direct listing. Airbnb did at least briefly consider the hybrid structure, but was quickly turned off by what it believed would be an extra one to three months of regulatory "testing."

There should be a small secondary piece for early shareholders, but uptake was relatively light given the broader hospitality sector challenges.

Airbnb "hosts" will not be given cash bonuses to buy shares. This is partially for regulatory reasons, but more because a similar (and laudable) effort by Uber went so poorly.

The company instead is putting aside 9.2 million shares for an "endowment" that's intended to help hosts in areas like education and emergency financial aid. It becomes effective once those shares reach $1 billion in value, with CEO Brian Chesky making an additional personal commitment of shares valued at over $100 million.

The filing will detail a new equity compensation plan for Chesky, who is pledging to donate all of his future equity comp to philanthropic causes.
Financials: Airbnb is expected to show its past five years of results.

This would include profitability in 2017 and 2018, but a net loss in 2019.

It's unclear how granular it will get on the 2020 results, in terms of segments. But what we know is that its cross-border business basically disappeared with the pandemic, as did much of its urban apartment rental business. On the upside have been suburban and rural rentals, including long-term bookings that previously weren't a core offering.

The big picture: Wall Street sources say they aren't concerned that the imminent IPO flood will lead to attention and/or capital deficit.

In addition to Airbnb, expect upcoming listings for DoorDash (already filed), Affirm, Roblox and Wish.

"Fund managers have been looking at these companies for a while, even if they didn't have the IPO prospectuses, and fortunately from a capital allocation perspective, there isn't much overlap in terms of industry sector," one banker explains.

There's also the recent failure of Ant Group's mega-offering, which could free up some cash (particularly for Affirm, since it's a fintech).
The bottom line: Airbnb has been teasing this IPO, both internally and externally, for well over a year. The wait is almost over.