Airbnb Inc. is considering raising capital from new investors, as the home-sharing giant wrestles with escalating losses due to the devastating impact of the coronavirus pandemic on its global business, according to people close to the company.
The pandemic has also thrown into disarray Airbnb’s plans to go public this year, and the company’s board and investors are divided over the best path forward, according to people familiar with the matter.
The San Francisco-based startup, which lets people list their properties for rent on its marketplace, has racked up hundreds of millions of dollars in losses this year, one of the people said. A spokesman for Airbnb said the company has “$4 billion in liquidity” and is “focused with our board on ways we can help our community weather this crisis.”
It is unlikely that the company will be able to attract investors at its 2017 valuation of $31 billion, when it last raised money, the people familiar with the matter said. The management is mulling how low it is willing to go to seek an injection of capital.
The Wall Street Journal reported last month that Airbnb internally was already valuing the company at less than $31 billion.
Airbnb, one of the nation’s biggest private companies, had planned to make its widely anticipated debut on the public markets this year via a direct listing, which wouldn’t involve raising any additional money.
The company is now considering instead raising cash using an initial public offering, and has held several meetings with its board this month to discuss its approach, the people familiar said. Morgan Stanley and Goldman Sachs Inc. have been appointed as dual-lead underwriters. But an IPO could go ahead only when the virus crisis has eased, stock markets stabilize, and the company’s finances recover to a stable footing, the people familiar said.
An Airbnb spokesman said it “should come as no surprise that in these extraordinary times, like virtually every company in the world, we are regularly consulting with our board to discuss our work.”
Airbnb–caught in the crosshairs of the all-out crisis the virus has created in the global travel industry–now faces evaporating revenues, as well as a backlash from the hosts who are the backbone of its business.
All its major markets are getting hammered. Bookings last week were down year-on-year around 95% in Asia, 75% in Europe–the company’s biggest market–and 50% in the U.S., according to one of the people close to the business. A report last week by Airbnb-analytics firm AirDNA also showed bookings tanking in big cities world-wide. This week’s numbers are much worse, the person said.
A spokesman for the company said the figures weren’t accurate but declined to provide other numbers.
Airbnb’s board had already raised concerns about the company sliding into the red, even before the pandemic upended its business, the Journal previously reported. Executives were grilled at a board meeting late last year on why overheads such as its head office and employee expenses had been allowed to balloon, outpacing even the then-rapid growth in revenue.
Some board members are unhappy that Airbnb didn’t go public last year, when a soaring stock market put premium prices on even unprofitable startups, the people close to the company said. Employees are concerned the listing could now be delayed beyond the end of the year, meaning many valuable stock options will expire, becoming worthless.
One person close to Airbnb said management and the board are working in sync but that outside investors are agitated about the company’s troubles and its response to them.
Brian Chesky, Airbnb’s chief executive, is under intense pressure from employees to go public, after more than 10 years as a private company. He recently sought to reassure staff that a delay won’t happen. In a staff meeting held earlier this month and on a separate phone call with employees last week, he said the company plans to stay the course of going public this year, the people close to the business said.
Some investors are skeptical this will be possible, or question what price the stock might achieve.
The price at which Airbnb shares are trading has fallen sharply, according to people who specialize in the market for private company shares.
Before the pandemic hit, shares were trading privately at more than $140, valuing the company around $45 billion to $47 billion, according to Jared Carmel, managing partner at Manhattan Venture Partners, a secondary-market specialist. Now, he said, “we’re seeing shares tick back to close to $105.” That’s what Airbnb’s shares priced at in its last funding round in 2017, which valued the company at $31 billion, according to Dow Jones VentureSource data.
Private buyers of Airbnb shares are telling sellers they need to drop their valuations significantly. Mitchell Green, a partner with Lead Edge Capital, was approached last week by a broker trying to sell him Airbnb shares. The ask was $30 billion, said Mr. Green. “Call me when they want $10 billion,” Mr. Green said he told the broker.
Airbnb has the right of first refusal on its shares being sold, and demand for the stock has traditionally outstripped supply, which can skew prices, according to Mr. Carmel.
Airbnb has already taken some steps to respond to the crisis. The company this weekend changed its policies to allow consumers to cancel most bookings without cost. This loses Airbnb its fees on the bookings, but also deprives the hosts–who keep most of the money paid by guests–of their income.
Airbnb on Tuesday wrote Congress and the administration asking for tax relief and other measures to help its hosts. The company is the largest home-sharing platform in the U.S., and before the pandemic had more than two million people on average booking every night into its listings world-wide.
In a joint statement posted to the company’s website, Airbnb’s co-founders Mr. Chesky, Joe Gebbia and Nate Blecharczyk said the move to offer full refunds for cancellations was “the responsible thing to do” given the guidance of governments and health experts. They added that they realized it would cause “incredible hardship” for many of their hosts.
That hasn’t mollified everyone affected. Mr. Blecharczyk’s tweet on the congressional requests provoked a storm of online comments from hosts. One typical response: “That’s nice that you’re asking the government to bail us out with loans since @Airbnb has bankrupted us. I literally have $23 in my bank account right now.” Others questioned the plight of hosts outside the U.S.
Messrs. Chesky, Gebbia and Blecharczyk, who in 2008 founded what was originally called Airbed & Breakfast, said this week they are confident their business will survive.
“While it’s clear to all of us that the coronavirus has deeply impacted our community, we know that this moment will pass and travel will be back,” the co-founders said in a joint statement. It added that people were already “starting to use Airbnb for long-term bookings and stays close-by.”