Hello fellow hosts, well here it is
My take on it -
Some half truths
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.
@Zohreh1 Neither the risk or debt levels are normal for a tech company, but if you (or others) believe otherwise, that's absolutely fine of course. 🙂 Airbnb is paying 12% interest on the $2b in debt it raised to survive the early stages of the pandemic. Booking is paying 4% on their loans. The level of risk and exposure to debt is much higher at Airbnb.
As always, everyone should do their own due diligence (but many don't, because they don't have the knowledge or experience to know what this stuff means, so they rely on their broker's advice or other financial market commentators to decipher it for them).
Yeah, 12% is a lot. I won't be buying personally as many of these stocks go down significantly after IPO. Lots of other good options out there right now.
Pre IPO share offer to selected US hosts
Please note that if you are a US host invited to participate, you MUST ASK if these shares are subject to the 93 day lock up period post launch. The info the company has put out about this offer to selected US hosts does not state whether or not these pre IPO shares are saleable immediately after launch. This link below explains what an IPO lock-up is
@Sharon1014 , thanks for the thorough prospectus on the prospectus! That debt load is pretty severe, I did reserve the right to buy but still not sure if I am going to advantage it, have to wait and see what the terms are. stay well, JR
That's very wise @Melodie-And-John0 . Perhaps you or other US hosts could let the rest of us know what the details are when / if the offer is made to you? I for one would be very interested to see the exact terms they are offering.
I note that Morgan Stanley and Goldman Sachs are the underwriters for this launch. They are both also extremely large proprietary trading firms, so wondering in particular if they are planning to use their own brokerages to execute this offer, and if so what commissions they will receive as well as whether or not hosts who opt in will be subject to the 93 day lock-up period and be unable to sell any shares.
Something to keep in mind, if the "street" (market generally) thinks they can pick up the shares at a cheaper price by waiting a few days to a few months, there may not be a lot of liquidity (buyers) during the first few months. Some market commentators seem lukewarm courtesy of IPO exhaustion, previous bad experience with other IPO's that tanked after launch and NASDAQ being quite overbought.
I look at some of this and think - Airbnb makes so many unforced errors in their senior management. Host input about what is happening in real-time is key. I wish the host committee had been put together to weigh in on this. My take on the comments from the news article posted above:
1.".... In its prospectus, the company put an emphasis on building a community around its hosts and guests, positioning that community as a differentiating factor from its competitors. ..."
And yet Airbnb actively encourages multi-unit absentee investors with no ties to the communities they buy properties in (and often without the support of residents). This puts individual hosts at a severe disadvantage. I'm not sure how this builds communities. I have a bulging guest book of memories and private notes. There are non-resident individuals who bought homes in our neighborhood and flouted the law, including one we had to fight at the zoning board because he routinely advertised a single family home as suitable for large groups of up to 20. The reviews on his page confirm this. Our max in the city is 8. So there's "slogans" and there is reality.
2. "... The company will have three classes of stock. Class A stock holders will get one vote per share while class B holders, which include the founders and early investors, will get 20 votes per share. Class H holds no votes and is primarily for long-time hosts...."
Wait! What? So hosts whose inventory is the primary source of revenue for Airbnb are invited to participate with non-voting shares. So we're the fuel, but we can't vote? Are the shares cheaper? And who would we sell them to? Someone else who doesn't want to be a true shareholder? I have never heard of asking someone to buy stock in a company without having a voting share. Even the "Youth" stock we bought in an investment fund when the girls where younger were voting shares. What value is a non-voting share?
3. "....Unusually, the company has a Stakeholder Committee on its board of directors whose mission is to consider interests of “key stakeholders,” including guests, hosts, communities and employees. ..."
Anyone know who is on this "stakeholder committee"? Because honestly, the constantly shifting terms of service doesn't give me confidence there are active mom-and-pop hosts on there.
Honestly - just fix the problems hosts have identified and there wouldn't be a need for suits. And live up to the promises made.
4. ".....In November, the company was hit with a proposed class-action lawsuit by one of its hosts, alleging that the tech company violated its contract with hosts when it enforced the extenuating circumstances policy. .."
The new terms of service are effective January 2021. With a pending class action suit announced, the new TOS says hosts agree to waive the right to participate in a class action or their listings will be terminated. What? How is this helpful to keeping hosts on the platform. Again - fix the unforced errors and the terms that favor Airbnb and guests over hosts. We OWN the inventory. It would only take a more host friendly platform to build a better mousetrap. AIrbnb could be so amazing if it would stop thinking short term and think long term. Hosts are suing because AIrbnb is making the mistakes by retroactively violating the TOS we agreed to or penalizing hosts by making blanket policies to cover the few bad actors they refuse to supervise or kick off the platform. This is not rocket science. (or maybe it is - I dunno - I went to MIT and minored in Economics. These decisions wouldn't hold up at the Sloan School).
5. "....Airbnb endured numerous issues with its hosts this year since enforcing an extenuating circumstances policy in March that overrode hosts’ cancellation policies and claimed to offer full refunds to guests impacted by the coronavirus pandemic.
Later, Airbnb announced it would establish a $250 million coronavirus relief fund for hosts, returning 25% of what they would have normally received under their cancellation policies, but many hosts who spoke with CNBC complained that they were not receiving the correct amounts or any payments at all...."
Okay - this part kills me. My co-host lives on site. She lost her job. We still allowed cancellations because Airbnb sent emails to host asking them to consider being flexible. So I did. I would have expected the same courtesy. BUT - because Airbnb did not do the cancellation themselves I received a whopping $55. Less than the cost of a Hello Fresh box. It was a joke. I almost sent it back. And there was no invitation for the host grant even though in my industry all the work dried up. You couldn't "apply", you had to be invited.
So I do worry that much of Airbnb's problems are of their own making. I think the employees are deserving of seeing their stock options realized. I think the problems aren't at the lower tiers - they're at the top levels.
Still waiting for the host committee to activate and it needs to be 75% individual owners (should be 100%) who actively manage their listings. That's the backbone of the organization - or at least the part that fuels the touchy feeling sentiment the company sells. Many of the solutions are simple. Require government issued ID's and a matching profile photo (clear face - no animals, no kids, not landscapes) to book Airbnb. Provide full names and telephone numbers at the time of request (not booking). Profile MUST include a paragraph from the guest introducing themselves (the same as hosts are required to submit). Better customer service to provide real-time assistance. Someone who vetts all new listings to make sure they exist. Eliminate the AI bots that censor our inbox communications.
In short - GET OUT OF THE WAY.
Excellent post @Christine615 . Absolutely correct that the problems in the company (including prolifigate spending by Brian et al, which has put the company into so much debt) originate at the top. And yeah, pretty gob-smacking if not downright infuriating that the company now wants to hang its hat on the very same hosts it has routinely and systematically shafted.
Many hosts have Plan B ready to go, which is just as well. If the company nose-dives into the concrete post IPO, many of us could end up on the liquidator's list of creditors (and probably at the absolute bottom of the list).
Just one of the many omissions in the prospectus is a breakdown of how many hosts are exclusive to Airbnb and how many are multi-listed on other platforms. Add to that, a breakdown of how many hosts are in fact authentic local hosts (quality experience for guests) vs conglomerate property groups non-resident and managing remotely (crappy experience for guests).
@Christine615 Btw, Class H stock converts to Class A stock when sold, with attendant voting rights. Pg 305 of the prospectus
Consists of 9,200,000 shares of Class H common stock issued by us to our wholly-owned subsidiary on November 10, 2020. Each share of Class H common stock is entitled to no votes and will convert into a share of Class A common stock on a share-for-share basis upon the sale of such share of Class H common stock to any person or entity that is not our subsidiary. For more information regarding our Class H common stock, see the section titled “Description of Capital Stock.”
and on Pg 308
Class H Common Stock
Each outstanding share of Class H common stock will convert into a share of Class A common stock on a share-for-share basis upon the transfer, assignment, sale, or other disposition of such share of Class H common stock to any person or entity that is not our subsidiary.
@Christine615thanks so much for the excellent deep dive! Spouse was actually encouraging me to consider buying some stock, I was skeptical to put it mildly You've elegantly made the argument for me. With hopes for a better world in 2021, Sally