Airbnb might face an acid test in the run-up to next year’s IPO

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The market is abuzz with news of more tech companies going public, indicating that 2020 will be a busy year for the IPO market. Having witnessed a slew of Wall Street debuts this year, there is a lot of speculation among investors about the upcoming IPOs, with the latest being online accommodation marketplace Airbnb.

Airbnb to go public next year in a high-profile IPO
Picture Courtesy: InstagramFotografin (Pixabay)

Headquartered in San Francisco, California, Airbnb has more than seven million property listings across the world. This week, the company made it official that it is planning to go public next year. It is not known if the management has filed the IPO papers with the regulators. The accommodation integrator may elicit interest among investors for its community-based business model that offers a two-way channel for property owners and guests to connect – the company’s unique selling proposition.

Air of Caution

However, the response to Airbnb’s stock market debut will be a bit cautious, considering the unimpressive post-IPO performance of some of the tech startups that went public recently, including ride-hailing platforms Uber (UBER) and Lyft (LYFT). More recently, the postponement of the WeWork IPO, amid concerns over funding issues and mounting losses, took the sheen off the still-buoyant IPO market. While Uber, Lyft and Slack (Work) are trading below their IPO prices, others like Pinterest (PINS) and Zoom (ZM) made decent gains since their debut.

Also read: 9 IPO stocks that have given 100 % returns

Considering the travel app’s moderate brand value, it will have to work hard to keep pace with competitors like Booking.com. Like most American e-commerce platforms, Airbnb is making inroads into the Chinese market as part of its expansion plan. The company’s long-term prospects in the Asian country will depend on its ability to effectively comply with the local rules and stay resilient to the macroeconomic uncertainties. It also needs to tackle competition from local accommodation-sharing portals like Xiaozhu.

Mixed Mood

A section of market watchers is bullish about Airbnb’s prospects as a public company, considering its relatively strong financial background that increases the chances of a near-term turnaround. A report from the company recently said it generated about $1 billion in revenue in the second quarter.

Valuation

As per the most recent estimate, Airbnb is valued at $31 billion. Earlier, co-founder Brian Chesky had ruled out going public in the current year. In all likelihood, Airbnb will go for a direct listing.

Related: Booking Holdings Q1 2019 Earnings Call Transcript

The company, which was founded in 2008, has long been doing the groundwork to prepare itself for the public listing – by strengthening the management team and pursuing strategic acquisitions, with the latest being the addition of global online marketplace Urbandoor.

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