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Nov. 17, 2020, 7:00 a.m. EST

Airbnb aims at $1 billion in first IPO filing, which shows ravaging effects of pandemic

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By Levi Sumagaysay

Airbnb Inc. submitted its IPO filing Monday, becoming the latest big name to join the push to go public despite the COVID-19 pandemic.

The global online-rental marketplace’s business was severely impacted and continues to be affected by the coronavirus pandemic. Although it is starting to mount a comeback as it adjusts to the new realities of limited travel for business and pleasure, Airbnb /zigman2/quotes/222990650/composite ABNB -6.22% has lost more money in the first nine months of this year than it lost all of last year. Its gross booking value was down nearly 40% and its revenue declined more than 30% year over year.

But in a testament to what Airbnb calls its resilient business model — combined with deep cost-cutting prompted by the pandemic when it first hit — the San Francisco-based company posted a third-quarter profit of $219 million on revenue of $1.34 billion. Still, it warned of continued challenges, mentioning strict new lockdowns in Europe.

“Similar to the impact of the initial COVID-19 wave in March 2020, we are seeing a decrease in bookings in the most affected regions,” Airbnb said in its prospectus.

Airbnb expects to list its shares on the Nasdaq Global Select Market under the ticker symbol ABNB, and the listing will be led by Morgan Stanley and Goldman Sachs, two of 35 underwriters listed in the prospectus. The company stated a $1 billion target for the IPO, though that is typically a placeholder amount on an initial filing that will be updated later in the process. The target does suggest big ambitions, though, as the standard placeholder is $100 million.

Airbnb, born because two of its co-founders took advantage of a 2007 international design conference in San Francisco and offered up airbeds in their apartment to help cover their rent, now has more than 4 million hosts who rent out everything from a spare room to empty mansions. The company has served more than 825 million guests in 220 countries and regions, according to its filing.

The company lists competitors galore, including online travel agencies like Expedia Group /zigman2/quotes/202291990/composite EXPE -2.41% , search engines such as Alphabet’s /zigman2/quotes/202490156/composite GOOGL -0.19% Google and Baidu /zigman2/quotes/209050136/composite BIDU -4.07% , listings providers like Craigslist, and hotel chains like Marriott International Inc. /zigman2/quotes/200170042/composite MAR -1.65% , Hilton /zigman2/quotes/202780307/composite HLT -3.30% and more.

In the nine months ended Sept. 30, the company’s gross booking value was $18 billion, down 39% year over year, on revenue of $2.5 billion, down 32% from the year-ago period. Last year, Airbnb’s gross booking value was $38 billion, an increase of 29% from $29.4 billion in 2018. Its 2019 revenue rose to $4.8 billion, up 32% from $3.7 billion in 2018.

During the first nine months of this year, the company had a net loss of $697 million, a decrease of $374 million year over year, and adjusted Ebitda loss of $230 million, a decrease of $253 million year over year. 

In 2019, the company lost $674 million and had an adjusted Ebitda loss of $253 million, compared with a loss of $17 million and adjusted Ebitda of $171 million in 2018.

Although Airbnb mentioned in its filing that it posted a profit in the third quarter, that’s due in large part to the actions it took near the beginning of the pandemic: It cut its workforce by 25% in May, suspended marketing and other spending, and reduced executive salaries. The company expects greater year-over-year declines in gross booking volumes in the fourth quarter of 2020 than in the previous quarter, and greater year-over-year increases in cancelations and alterations, too.

As is becoming increasingly common among tech companies, Airbnb has three different classes of stock meant to ensure its founders can retain control. It also has a fourth class of stock that establishes a Host Endowment Fund that it said is “designed to allow our hosts to share in the success of our business.”

Airbnb is joining a parade of recognizable startups that have gone public this year. The pandemic put the IPO market on pause, but in the past few months, tech companies have seized on investors’ appetite to place bets on the hot new thing by going public. They include cloud company Snowflake Inc. /zigman2/quotes/220991541/composite SNOW -4.10% and gaming company Unity Software Inc. /zigman2/quotes/221035391/composite U -1.20% , while software providers Asana Inc. /zigman2/quotes/221282045/composite ASAN +4.01% and Palantir Technologies Inc. /zigman2/quotes/221054928/composite PLTR +2.89% went for direct listings. App-based delivery platform DoorDash Inc. filed its IPO prospectus last week, and online retailer Wish and children’s gaming company Roblox Corp. are expected to submit their filings soon.

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