Airbnb has submitted a draft Registration Statement on Form S-1 to the Securities and Exchange Commission (SEC), relating to the proposed initial public offering of its common stock, according to a statement released by the company on Wednesday.
The company is yet to reveal the number of shares to be offered and the price range. The statement said the initial public offering is expected to take place after the SEC completes its review process. Morgan Stanley and Goldman Sachs Group Inc are lead advisers on the IPO.
Airbnb revolutionized the hotel industry since it was founded in 2008. The company allows individuals to rent out rooms in their homes for travelers and get paid accordingly. The startup thus became one of the most innovative and lucrative ideas in the hotel industry, reaching at one point, $31 billion in valuation.
But the announcement to go public came as a surprise following the company’s travails this year. Airbnb has been hit hard by the coronavirus pandemic that halted aviation and hospitality activities for months around the world.
The US aviation industry lost an estimated $330 billion in revenue since early March, according to the report made on Aug. 13 by the US Travel Association.
Airbnb alongside others took a hard blow, laying off nearly 2,000 employees, about 25% of its workforce in early May. The company was forced to downsize its marketing budget and incurred billions of dollars in debt.
Property owners complained that Airbnb owed much on rentals and was taking so long to pay. The situation stirred concern among stakeholders, and analysts said it may affect the company’s relationship with hosts and eventually, its planned initial public offering.
“It’s no doubt a reflection of the terrible loss of business they experienced earlier this year. This slow payment to the hosts concerns me because inevitably some of these hosts are going to put less of their inventory on Airbnb,” said Henry Hartevedt, a travel industry analyst at Atmosphere Research Group.
But the company started recording a rebound in August as many people moved to rural areas, spurring a surge in business for Airbnb hosts. CNBC reported that the rural Airbnb served as local getaway for Americans trying to escape home confinement and boredom of the pandemic.
Airbnb last funding in April put its valuation to $18 billion, indicating huge loss as it falls well below the $26 billion it cited as internal valuation in early March.
Andrea Walne, general partner at Manhattan Venture Partners, an Airbnb investor said the move may help the company to replenish its 2020 losses through public offering.
“The company may be thinking that the lost value they’ve realized in 2020 could be recouped as a public company and that will be reflected in the upside in their stock price,” Walne said.
Airbnb’s decision to go public must have been inspired by some companies who recorded growth after going public. The capital market has shown signs of sturdy comeback in the past weeks. Reuters reported that some public companies like online car seller, Vroom Inc and business intelligence platform ZoomInfo Technologies Inc experience shares surge.
Kathleen Smith, principal at Renaissance Capital, a provider of institutional research and IPO ETFs said: “We believe that investors are willing to look beyond COVID issues and value companies based upon post-COVID scenarios. It’s a constructive IPO market.”
With stocks showing signs of recovery, investors are likely going to put their money in public companies. Airbnb is hoping that its little progress will be sustained as businesses open and restrictions get lifted.