Author Topic: AirBnB - likely 2019 IPO  (Read 1729 times)

gfp

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AirBnB - likely 2019 IPO
« on: January 15, 2019, 12:30:11 PM »
I have no idea what valuation AirBnB is looking to get at their IPO, but as it is discussed as a likely 2019 IPO, and it is the first IPO I have been interested in in quite some time, I thought I would start a thread.  Perhaps others have interest in this business model.

Bill Gates has mentioned before the difference between AirBnB's network / platform effect and that of an Uber or Lyft.  Basically, Uber has to be the dominant network (of drivers/users) in each local market.  It can be number one in the USA but struggling in Asia, etc..  But AirBnB is a truly global platform.  The property owners go where the renters are, and vice versa.

My favorite part of the AirBnB business model, and the likely reason it hasn't had to take gobs of venture capital financing in, is the enormous float that the company generates.

When someone books an AirBnB rental, their credit card is charged in full.  AirBnB then holds that money - say for an average of 2 months or more - and then pays most of it to the AirBnB host the day after the guest actually checks in to the property.  The more the platform grows, the more float sits with AirBnB.  It's better than the payroll processors (ADP, Paychex, etc) - which are often cited as enjoying the benefits of float (but usually only when interest rates are rising).

As I mentioned elsewhere, my wife has some AirBnB rentals (she is the host, but never sees the renters - self check in/out, stand alone properties).  When she launched these rentals, they were on VRBO and AirBnB simultaneously.  Both companies allow you to easily sync your calendars so that a property is not double-booked.  She got 98% of the rentals from the AirBnB platform.  VRBO was worse on payment transparency to hosts and a few other things that would turn off hosts.  So she quickly dropped them all together.  We've had AirBnB guests from all over the world and have stayed in AirBnB properties all over the world.

It's tough to unseat the dominant global platform on something like that.  Risks include increasing local regulation - AirBnB is seen as the enemy of neighborhoods with actual neighbors, affordable housing, etc.  But in my experience it is hard to put the genie back in the bottle on stuff like this.

The Float and the dominant global network are what attracts me to this business.

Anyone else have thoughts on it, while we wait patiently to see a price?


ajc

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Re: AirBnB - likely 2019 IPO
« Reply #1 on: January 15, 2019, 01:04:46 PM »

With any luck it won't price that far above its last $31B valuation. We'll see.
Of the major unicorns that're expected to IPO this year, it looks like the most interesting.
AirBnB Experiences seems under appreciated as well.
I've noticed it's often a good idea to invest only after lock-up periods expire though. Also usually allows time for some of the hype to dissipate.



Hielko

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Re: AirBnB - likely 2019 IPO
« Reply #2 on: January 15, 2019, 01:21:25 PM »
Quote
As I mentioned elsewhere, my wife has some AirBnB rentals (she is the host, but never sees the renters - self check in/out, stand alone properties).  When she launched these rentals, they were on VRBO and AirBnB simultaneously.  Both companies allow you to easily sync your calendars so that a property is not double-booked.  She got 98% of the rentals from the AirBnB platform.  VRBO was worse on payment transparency to hosts and a few other things that would turn off hosts.  So she quickly dropped them all together.  We've had AirBnB guests from all over the world and have stayed in AirBnB properties all over the world.
I'm a regulator user of AirBnB and I like their platform a lot. But that's sort of obvious that there are many people like me. Otherwise the business wouldn't be as big as it is today.

Small note w.r.t. float (that I don't think is very important anyway), but these days you can pick if you want to be charged the full amount when you make your reservation, or spit it in two transactions with the last half of the booking amount only charged close to your booking date.
« Last Edit: January 15, 2019, 01:31:00 PM by Hielko »

gfp

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Re: AirBnB - likely 2019 IPO
« Reply #3 on: January 15, 2019, 02:35:18 PM »
Thanks Heilko - that's true, they did recently offer the option to pay half upfront and half closer to your stay for reservations over $250.  Curious why you don't think the float aspect of the business is very important?  Seems they are holding a revolving fund of several billion dollars of other people's money at any given time - an amount that continues to grow.  Sounds useful for a high growth company that doesn't need much capital to grow as it is.  At least useful for founders and early investors who want to minimize dilution.

SlowAppreciation

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Re: AirBnB - likely 2019 IPO
« Reply #4 on: January 16, 2019, 09:40:41 AM »
Completely agree, and I'm excited to take a look at their prospectus. I was a host for 4 years to pay off my student loans, and am a big fan of the product and the business. As you mentioned, they used to (not sure if they still do) charged users before their stay, and paid out hosts on the day after check in. So Airbnb was definitely generating good float. For what it's worth, the former CFO (from Blackstone) had apparently tried using that float: https://venturebeat.com/2018/02/07/airbnb-reportedly-built-an-internal-hedge-fund-that-makes-5-million-per-month/

That's great if you have someone who's honest and trustworthy a la Buffett... not so great if they're not as it could potentially jeopardize the business. 

Liberty

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Re: AirBnB - likely 2019 IPO
« Reply #5 on: January 17, 2019, 07:00:30 AM »

With any luck it won't price that far above its last $31B valuation. We'll see.
Of the major unicorns that're expected to IPO this year, it looks like the most interesting.
AirBnB Experiences seems under appreciated as well.
I've noticed it's often a good idea to invest only after lock-up periods expire though. Also usually allows time for some of the hype to dissipate.

They certainly have a stronger network moat than other unicorns like Uber, since they have a global network and Uber has local clusters (when you're in city X, you don't care how many drivers they have in other cities, but when you're traveling, you could go anywhere so they need global inventory, and any competitor who wants to compete also needs global inventory).
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Spekulatius

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Re: AirBnB - likely 2019 IPO
« Reply #6 on: January 18, 2019, 03:59:37 AM »
Does a valuation of ~$30B for Airbnb make sense? Are there any revenue and profit numbers out there for this company? The combined market cap of HLT and MAR is less than $60B and those two are doing pretty well at the moment and control a significant part of the hotel space.
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PLynchJr

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Re: AirBnB - likely 2019 IPO
« Reply #7 on: January 18, 2019, 05:57:14 AM »
Booking Holdings is at 80B.  Without seeing the numbers...30B doesn't sound crazy to me.

gfp

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Re: AirBnB - likely 2019 IPO
« Reply #8 on: January 18, 2019, 06:07:04 AM »
I don't even know if the numbers they throw around in public for "revenue" are their revenue cut from fees or the entire value of each booking (the vast majority of which is passed through to hosts).  I am very much looking forward to seeing detailed financial statements.

Pelagic

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Re: AirBnB - likely 2019 IPO
« Reply #9 on: January 18, 2019, 09:11:18 AM »
Does a valuation of ~$30B for Airbnb make sense? Are there any revenue and profit numbers out there for this company? The combined market cap of HLT and MAR is less than $60B and those two are doing pretty well at the moment and control a significant part of the hotel space.

The article linked above regarding their internal "hedge fund" gives some numbers.

Quote
But the financial details indicate that Airbnb is going strong: “An email to the board and other major shareholders last month [Jan 2018] helped instill further confidence in the business. Airbnb’s earnings before interest, taxes, and other expenses came to $93 million, more than double the company’s forecast of $36 million, according to the email reviewed by Bloomberg. Revenue beat expectations by about $120 million.”

If their internal fund is accounting for up to $60M of that, is that sustainable given the option to now pay only half the deposit at the time of booking?

$30B seems like a lot to pay for $100M of EBITDA, probably higher now since the article is almost a year old.

https://venturebeat.com/2018/02/07/airbnb-reportedly-built-an-internal-hedge-fund-that-makes-5-million-per-month/