Airbnb's IPO Prospectus released

Sharon1014
Level 10
Sellicks Beach, Australia

Airbnb's IPO Prospectus released

Hello fellow hosts, well here it is

https://www.sec.gov/Archives/edgar/data/1559720/000119312520294801/d81668ds1.htm#toc81668_1

 

My take on it -

Some truths

Some half truths

Some non-truths

Some contradictions

Some omissions

 

But most important of all for hosts, is to the read the Risk Factors profile and see for yourself just how indebted Airbnb is (interest payments alone on the $2b borrowed during early pandemic days are $240 million per month, not including other previously acquired debt) and how precarious their current financial position is.... here's the summary

 

Risk Factors Summary

Our business is subject to a number of risks and uncertainties of which you should be aware before making a decision to invest in our Class A common stock. These risks are more fully described in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, among others, the following:

 

 

 

The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and will continue to materially adversely impact our business, results of operations, and financial condition.

 

 

 

We have incurred net losses in each year since inception, and we may not be able to achieve profitability. We incurred net losses of $70.0 million, $16.9 million, $674.3 million, and $696.9 million for the years ended December 31, 2017, 2018, and 2019, and nine months ended September 30, 2020, respectively. Our accumulated deficit was $1.4 billion and $2.1 billion as of December 31, 2019 and September 30, 2020, respectively.

 

 

 

Our Adjusted EBITDA and Free Cash Flow have been declining, and this trend could continue.

 

 

 

Our revenue growth rate has slowed, and we expect it to continue to slow in the future.

 

 

 

If we fail to retain existing hosts or add new hosts, or if hosts fail to provide high-quality stays and experiences, our business, results of operations, and financial condition would be materially adversely affected.

 

 

 

If we fail to retain existing guests or add new guests, our business, results of operations, and financial condition would be materially adversely affected.

 

 

 

Any further and continued decline or disruption in the travel and hospitality industries or economic downturn would materially adversely affect our business, results of operations, and financial condition.

 

 

 

The business and industry in which we participate are highly competitive, and we may be unable to compete successfully with our current or future competitors.

 

Laws, regulations, and rules that affect the short-term rental and home sharing business may limit the ability or willingness of hosts to share their spaces over our platform and expose our hosts or us to significant penalties, which could have a material adverse effect on our business, results of operations, and financial condition.

 

 

 

We are subject to a wide variety of complex, evolving, and sometimes inconsistent and ambiguous laws and regulations that may adversely impact our operations and discourage hosts and guests from using our platform, and that could cause us to incur significant liabilities including fines and criminal penalties, which could have a material adverse effect on our business, results of operations, and financial condition.

 

 

 

Our substantial level of indebtedness could materially adversely affect our financial condition. We had outstanding indebtedness with a principal amount of $1,997.5 million as of September 30, 2020.

 

 

 

At the time of the offering, we expect to recognize stock-based compensation expense of approximately $                 for which the service-based vesting condition was satisfied or partially satisfied as of                      and for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering.

 

 

 

We may have exposure to greater than anticipated income tax liabilities. In September 2020, we received a Draft Notice of Proposed Adjustment from the IRS for the 2013 tax year proposing an increase to our U.S. taxable income that could result in additional income tax expense and cash tax liability of $1.35 billion, plus penalties and interest, which exceeds our current reserve recorded in our consolidated financial statements by more than $1.0 billion.

 

@Sarah977 @Robin4 @Ute42 @Mikki0 @Maire36 @Maarten10 @Simon2782 @Inna22 @Ann72  @Fred13  @Francesco1366 @BenkaandKeith0 @Maire36 @Jeffrey434 @Rebecca181 @Peggy300 @Helen427 

 

@Katie @Nick @Lizzie @Quincy 

 

26 Replies 26

@Sally221  @Sharon1014  @Sarah977 I  may invest. Depends on the initial offering. I remember being irritated with FB and didn’t invest. That wasn’t one of my better decisions.

 

What I’m bothered about is issuing shares to hosts with no voting rights. Also, Airbnb still hasn’t named their host representatives.

 

The question is whether Brian and the Execs are required to hold their stock for 90 days or more. If employees want to cash out I’m cool with that but Senior mgt should be required to hold stock for a year to guarantee the success of the company.

 

Uber struggled because they owned no inventory. Hard to be successful if the inventory can walk to another platform. You would think Brian would reward hosts for fueling his business not change the TOS daily and threaten hosts with delisting if they don’t comply.

 

So let’s wait and see what the stock offer is, if offered and what the terms are. But with so many individual hosts struggling in the pandemic, I doubt many can free up the cash to invest.  Would hate to see the lion share of the stock going to corporate LLC absentee investors.

 

For once I’d like to see the smaller hosts score a win.

Sharon1014
Level 10
Sellicks Beach, Australia

Airbnb also technically owns no inventory, we hosts own the inventory.

 

FB launched on NASDAQ in May 2012, different scenario on NASDAQ at present - here's the chart.  The latest surge of bull traffic happened after govt intervention with wave 1 of the pandemic, when everyone needed tech related resources to work from home, school from home and techie related amusements - that particular market (and the consumer spending liberty that existed then) may well be exhausted

 

NAS100USDMonthly.png

 

@Christine615 @Sally221 @Melodie-And-John0 @Zohreh1 @Sarah977 @Ute42 

Thats a scary peak @Sharon1014 , more like a cliff!   Seeing it that way does make you wonder what is next, will it crash or will the Fed continue to flow my great grandkids futures into a debt pool nobody could ever escape.  Im a couple years from retirement and wondering if its time to back off the stock market roulette wheel.  Time to chat with an advisor ....  Stay well, JR 

It does look a bit nasty huh @Melodie-And-John0 .  Many traders have been concerned about NASDAQ's overbought status and the potential for it to head south minus a brake.  Tech investors are being encouraged to diversify into more sedate and safe yield-producing stocks but even those are not necessarily a safe bet if you end up losing 10-50% of your capital in a more widespread market down turn.  A profit isn't a profit until its booked.  Until then it's just numbers on a screen. 

 

Market law = stair step up, elevator down.  So yup, chat with your financial advisor, good move. 

  Your great-grandkids? I have my doubts about whether the planet will even support human life by the time my great-grandkids would be adults unless something drastically changes soon. At least I believe the world will be quite a different place. 

Stocks and investments, the idea that people had "extra" houses they didn't need to live in themselves that they rented out to strangers on something called Airbnb, that some people cared so little about anyone but themselves that they refused to put a little piece of cloth over their mouths to prevent spreading infection, will all be like ancient history, rather unfathomable.

 

" Wow, no wonder their civilization collapsed".

@Melodie-And-John0

@Sarah977 , I may not be as optimistic about tech stock efficacy as I am about our future overall after covid 19 gets relegated to the lower ranks as a treatable virus that pops up  around the globe on occasion.  I have to say, I am very excited about the highly effective vaccines that have been developed in undeniable record time, I work for a Chemistry department and my profs seemingly never saw this coming, most were preparing to hunker down for what they believed would be multiple dark winters but the beginning of the end of this chapter is now in sight less than a year from inception and there is much to be thankful for that will effect the recovery of the planet, our nations and Airbnb. 

 

A miracle of science and government working successfully together will  address a viral enemy of both private citizens and the state sooner than later.    We have more specialists every day engaging in wars against viruses than wars against people thanks to recent downsizing of forces abroad.  Nations have signed treaties that deescalate tensions in the Middle East, our self procurement of energy products has most certainly defunded terrorists and nations that were more content waging wars than learning to get along with its neighbors.  The USA and other nations have decided that we should start making and recovering important lifeblood products for ourselves again that we had relegated to others who choked the planet economically and ecologically both literally and figuratively to save a few pennies.   

 

These things should propel us all forward with newly energized, leaner and cleaner markets regardless of who is in charge of any one US branch of government.   I cant help but believe this all will end up floating most people boats higher and make our air and water more consumable for the majority of folks in the world, one can only hope!,  Stay well, JR

 

  

Sharon1014
Level 10
Sellicks Beach, Australia

From the prospectus - (abridged)  Note: no explicit mention of using funds raised to pay down the company's crippling $2b debt or the $1.3b the IRS reckons the company owes.  Nor any mention of what the company plans to do to support hosts and fix the many long-standing unresolved issues hosts have been raising repeatedly for years to no avail.

 

USE OF PROCEEDS (page 105)

The principal purposes of this offering are to increase our capitalization and financial flexibility and to create a public market for our common stock.

We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire or make investments in businesses, products, offerings, and technologies, although we do not have agreements or commitments for any material acquisitions or investments at this time.

We intend to use a portion of the net proceeds we receive from this offering to satisfy a portion of the anticipated tax withholding and remittance obligations.

 

@Christine615  @Melodie-And-John0  @Sally221  @Sarah977  @Zohreh1  @Ute42 @Andria13  @Dawn298  @S17  @Greg-and-Robbie0  @Tueykay0   @Dmitry--Mikhail-and-Lidia0  @Brenda220  @Stephanie241  @BenkaandKeith0  @Thor6 @Sandra1401  @Adriano78  @Jane2803  @Rebecca181  @Helen350  @Chris232 

Helen350
Level 10
Whitehaven, United Kingdom

@VictorandNatalia0 You might be interested in this ^! - Do you still want shares in a company with a multi-billion debt?

Sharon1014
Level 10
Sellicks Beach, Australia

The prospectus does address the likely on-going negative impact of Covid on the company's performance into Q4 2020 and Q1/Q2 2021 @Sarah977 , which was good to see.   However it also has all the elements of the hard sell too in seeking to paint a picture of bouncing recovery, which may in fact not be the case.   

 

The lingering effects of the virus and its ever mutating strains, the willingness of people to be vaccinated, the efficacy of vaccination, the short and long-term effects of vaccination, the impact of people who refuse vaccination (this group in particular presenting multiple risks) and the frequency of vaccination to acquire full immunity, will all impact the pace of global, domestic and local tourism recovery.  It may be several years yet (2-3 years+) before ABNB's optimistic hopes can be realised. 

 

Question is whether investors will think this company is a good investment at this particular juncture in time, or whether the timing is just "off" at the present moment.  Bit of a crap shoot in that regard, so many unknowns, including whether or not the company could survive 2-3 years of very limited income and negative growth.

 

Also bothersome, is the company's push into China, at a time when geo-political risks in the region are such that many western nation companies are scaling down or pulling out of that market altogether.  Developing the potential market in India is a big tick in the company's favour (once Covid is addressed), conversely, developing the potential market in China with such gusto as is presently occurring seems like quite a big risk play and one could backfire badly.  Just my 2c.

 

Sharon1014
Level 10
Sellicks Beach, Australia

Airbnb under scrutiny as a potential vehicle for money laundering and terrorist financing, but at least someone (the FCA) is watching out to ensure guest/host money is protected.  Reported in the UK Times and UK Telegraph yesterday

 

In July 2019, the FCA told electronic money institutions including Airbnb to review how they protected customer funds, after a review of other regulated payment providers found many were not adequately ring-fencing people’s money, potentially creating problems if a company were to go bust.

 

..  In August, Airbnb handed an analysis of its compliance with money laundering laws to the FCA and outlined the steps it was taking to correct the problems. It is awaiting a response from the regulator.

 

..  There is no suggestion that specific cases of money laundering or terrorist financing have been discovered, but failure to comply with anti-money laundering laws may mean a fine of up to 10pc of Airbnb Payments UK’s annual turnover, which was £444.5m last year.

 

Airbnb under scrutiny over crime controls (kaleistyleguide.com)

(this version of the article is not behind a pay wall)

Financial Conduct Authority probes Airbnb links to criminal cash | Business | The Sunday Times (thet...

Airbnb under scrutiny over crime controls (telegraph.co.uk)

 

@Sarah977 @Robin4 @Ute42 @Mikki0 @Maire36 @Maarten10 @Simon2782 @Inna22 @Ann72  @Fred13  @Francesco1366 @BenkaandKeith0 @Maire36 @Jeffrey434 @Rebecca181 @Peggy300 @Helen427 @Helen350 @Melodie-And-John0 

@Sharon1014 @Christine615 @Sally221 

Great discussion everyone!  thanks much @Sharon1014 for your insights.

I wanted to share that I received today an email from Morgan Stanley inviting me to participate in the Airbnb Directed Share Program reserved for eligible U.S. hosts and found out that they are pricing common stock at a guideline of $44-$50 ...  IPO is supposed to be next week Dec 9th and will start trading on Dec 10th I believe.

 

On a separate note, given that you read the prospectus more in detail does anyone know if they have addressed the lost revenue that they're going to face in their biggest money maker cities due to legal battles, esp. NY where Airbnb has cut a deal with the city to share hosts data for fines enforcement and will see their revenues reduced permanently (beyond covid effect) by 80%  or in Paris where the city is suing Airbnb for millions of Euros they won't be able to operate legally?   What I think it has been a smart move on their side is that in NY they've opened up to hotels to post their excess inventory at very competitive prices; so that may be a bright spot. 

 

Lastly regarding cost of debt, 12% is unimaginable in a world tending to negative interest rates; I'm sure after IPO they'll be able to issue bonds or negotiate other instruments at 3-4% at least? 

 

Glad I found this threat to share my thoughts and see what others think about this!

 

 

 

Sharon1014
Level 10
Sellicks Beach, Australia

@Florence372   The regulatory issues get a fleeting mention in the S-1 under the risk factors sections (there's a summary and then also a more in-depth mention further along in the document) however articulation of the full extent of the impact of these new regs on future revenue and "scalability" of the platform is noticeable in its absence.

 

And yes, the interest rate on their latest loans are astronomical for sure.  The reason for this is that ABNB have basically totally maxed out their credit card (and then some).  There is also a lien on the company in regard to these loans, preventing the company from borrowing any further money from any source.  Kinda speaks volumes about how precarious the company's financial position is.  ABNB are locked into these loans until 2025 (according to the prospectus).  Doubt somehow they'll be able to exit this financial arrangement without significant penalties.

 

Please see a new thread I started re the launch date and expected share price here

Re: Airbnb IPO Launch Date and Expected Share Pric... - Airbnb Community (withairbnb.com)