Airbnb IPO – our view and how to stay up to date

The global pandemic halted Airbnb’s plans to list its shares on the US stock market in March. Since then lots have been waiting for confirmation of the next steps and there’s been a lot of speculation on when, or even if, the IPO will take place.

But more recently in August, Airbnb once again confirmed those plans to list its shares on the US stock market.

Unfortunately UK investors won’t be able to take part, and buy Airbnb shares, in the IPO. Instead, they'll need to wait until the shares start trading on the stock market. Sources suggest this could happen in December this year.

Sign up for our Airbnb IPO alerts

While it might be a couple of months until investors are able to get hold of Airbnb shares, we’ve looked at how much Airbnb could be worth and share our view on the company.

This article is not personal advice. The value of investments, and any income from them, goes up and down so you could get back less than you put in. If you’re not sure if an investment's right for you, please speak to a financial adviser.

How much could Airbnb be worth?

That’s the multi-billion dollar question.

Over the years, Airbnb has raised money by selling shares to private equity companies. We can use this to track changes in the company’s pre-IPO valuation – although remember past performance isn’t a guide to the future.

In 2017, Airbnb was valued at $31bn. This shot up in November last year when private investors were said to be trading indirect stakes valuing Airbnb at around $42bn. However, the global pandemic, and collapse of the global tourism industry, led the company to raise $2bn in April this year at a price valuing Airbnb at $17bn.

Despite that, some have suggested the company could reach a valuation of more than $30bn when it lists on the stock market.

$17-$30bn+ is a wide-ranging valuation for an IPO by anyone’s measure, and shows the difficultly in predicting the company’s valuation.

So, what do we think?

It’s hard to knock what Airbnb’s achieved in a short time. And it’s a great example of how a company worth billions can grow from a simple idea.

It started with Brian Chesky and Joe Gebbia hosting guests in a spare room at their San Francisco home. In 2019, more than 2 million people stayed at an Airbnb hosted property every night. These range from apartments and homes to castles and tree houses.

The key to growth is Airbnb doesn’t have to own the property. It connects renters and property owners across the globe through its online platform. Hosts pay Airbnb a 3% commission, while guests pay a 6-12% service fee.

This business model is proving successful – revenue topped $1 billion in two quarters in 2019.

But 2020 has been very different.

Coronavirus has hit the travel and hospitality industries hard. Airbnb isn’t an exception. The company had lost $1.5 billion in bookings by mid-March, forcing it to cut 20-25% of staff in May to reduce costs.

And it’s impossible to predict the impact coronavirus will have on Airbnb’s future.

Airbnb could benefit – with staycations increasing and cash strapped customers preferring self-catered accommodation to booking a hotel and eating out.

However, whether that’s enough to offset the decline in international travel is uncertain. British Airways owner International Consolidated Airways doesn’t expect air travel to return to 2019 levels until at least 2023.

In June Airbnb Co-Founder Brian Chesky told Fortune magazine that the US market had “not fully recovered, but [was] recovering way faster than any one of us imagined… We are above where we were last year, and we could get even higher than what we would have forecast before COVID.”

The closer Airbnb’s IPO gets, the more media attention will increase. But, investors must look past the hype, fanfare and the history. Crucially, it’s important to distinguish between revenue or sales and profits – and as it’s a private company we really have very little idea what profitability looks like at Airbnb.

It’s important to understand the companies we’re investing in before investing. Know the company specific risks and make sure you’re happy with the long-term prospects. This information will become clear once Airbnb’s release its final listing documents.

As always, never put all your eggs in one basket.

Investing in an individual company is higher-risk and isn’t right for everyone. Your investment is dependent on the fate of that company. If it fails, you risk losing your whole investment. Investors should hold shares as part of a well-balanced, diversified portfolio.

Find out about diversification