18 ms·

Airbnb’s Stunning IPO

137 points by benoitg 6y ago

ricotico060 6y ago
For some reason, I just feel this price is too high for them and that it will fall in the coming 2-3 months. Then again, I think about their business model and there’s a lot to like: the don’t own any real estate and if they really wanted to, they could likely let go most of their staff and have a team of maybe 60 - 100 people run the bussiness as it mostly revolves around simply managing the app and keeping it running. I’m curious how “Moated” their bussiness will turn out to be. I don’t really see competition will cut in that much as Airbnb has such an head start and established brand. The only big question I have left is legality. My family works in the hotel bussiness and is required to do fire alarm checks and all sorts of other checks to prove that he is safe to customers. Will Airbnb one day be required to do this? Only time will tell.
- loufe 6y ago
  60-100 staff? Sorry but that's very naïve. Think about how many core services this takes: -finance -payment -HR -management -verification of hosts / properties -scam detection and moderation -legal -dispute arbitration -programming -infrastructure -projects -building management for properties like HQ they own -customer service -etc. They'd be lucky to get away with a couple multiples of your guess. This isn't netflix, there are far more facets to operations.
  - sida 6y ago
    I agreed with everything until Netflix. Netflix is incredibly complex. But yes, we can all agree that these take a lot of people to run
    - borroka 6y ago
      Netflix is complex and they also have entire teams whose effect on the product or business is zero or negative. Almost all companies are inefficient in different ways.
  - burkaman 6y ago
    Also monitoring laws and taxes in every municipality in the world. Maintaining the app is by far the simplest and easiest part of their business.
  - thebean11 6y ago
    > This isn't netflix, there are far more facets to operations. With Netflix I think you need to count the content creators, since first party content is the majority these days.
  - polote 6y ago
    > 60-100 staff? Sorry but that's very naïve. Think about how many core services this takes: I agree, but the engineering department could be handled with less than 50 people. Most of the work they do is linked to operation stuff and not engineering
    - patothon 6y ago
      the parent explained how it was impossible to get to that low of a number: -finance -payment -HR -management -verification of hosts / properties -scam detection and moderation -legal -dispute arbitration -programming -infrastructure -projects -building management for properties like HQ they own -customer service -etc. This represent so many people.
      - jbverschoor 6y ago
        But they don't even have "customer service"
      - AnimalMuppet 6y ago
        polote said "engineering". You responded by listing a bunch of non-engineering jobs that need done. OK, but you're arguing with something that is not what polote said.
        patothon 6y ago
        these are not non-engineering jobs to be done, these are internal and external products to build.
- sida 6y ago
  This comes up a lot (ohh it is a just a crud app and you just need a couple of people) This is fine and it is common misconception about how large app businesses work. (kudos to airbnb for making complex things look so simple) Here is a great post about Uber and why Uber gets complex (once you have many product lines across hundreds of cities, each with their own subtleties and rules/regulations) https://news.ycombinator.com/item?id=25376346 https://news.ycombinator.com/item?id=25376346
- victor106 6y ago
  Aswath Damodaran's analysis. http://aswathdamodaran.blogspot.com/2020/12/the-sharing-economy-come-home-ipo-of.html http://aswathdamodaran.blogspot.com/2020/12/the-sharing-econ... TLDR;The per share value based upon the latest share count is about $54/share.
- treis 6y ago
  >For some reason, I just feel this price is too high for them and that it will fall in the coming 2-3 months. They've got a lot going for them they are: A verb now like Google or Zoom. The dominant player in a global 2 sided market Potential major competitors (i.e. AirBnB by Marriott) are blocked by legal complications They're going to be very profitable for a long time. A 100billion valuation is a tall order as it implies that, at some point, you start generating 10 billion a year or so in cash flow. But I can see them doing that.
  - giarc 6y ago
    Becoming a verb can be hit or miss. Take for example Kleenex. If I say to you, "can you grab me a box of Kleenex at the store" you don't instinctively buy Kleenex brand, you buy whatever is on sale/stands out/is your regular brand.
    - treis 6y ago
      Kleenex has been the leader in their segment for a century now and has half the market.
zwieback 6y ago
and I thought they were struggling because everyone is staying home due to Covid...
- whimsicalism 6y ago
  I think the interior of America has given up on distancing.
  - tudelo 6y ago
    To be fair... you can stay at an airbnb and still be completely distanced from the owner of said airbnb. Yeah, you have to travel, but for many this is also possible without any close contact.
    - whimsicalism 6y ago
      I can't guarantee, but my bet is the majority of people vacationing in Airbnbs aren't being distant. The marginal impact on deaths now is probably lower than it was in March, but only barely.
      - zeroonetwothree 6y ago
        I’ve stayed in Airbnbs many times (zero since March) and have not even once met my host in person.
        whimsicalism 6y ago
        I'm not talking about interaction with the host, I'm talking about the general risks of traveling and then going to a new place where you are interacting with the people shortly after traveling. My claim is that most of these people are not going on exclusively nature-exploration vacations, they are going to see people or to patronize their businesses.
  - rezz 6y ago
    Maybe ease up on the costal holier than thou sentiment. I’m in Miami right now and 90% of the people I’ve met are tech / finance types from NYC doing blow inside of clubs until 4am.
boringg 6y ago
Talk about setting the wrong price for their stock. Looks like airbnb just handed over boatloads of money to wall street.
- deleted 6y ago
  [deleted]
- fennecfoxen 6y ago
  They already priced well above the expected range. It's highly unlikely they would have been able find subscribers for the 51,551,723 shares of the offering at the post-IPO price, before the IPO.
  - whimsicalism 6y ago
    > It's highly unlikely they would have been able find subscribers for the 51,551,723 shares of the offering at the post-IPO price, before the IPO. I don't believe that. They opened at $140 but couldn't have found subscribers for anything more than $68? I don't think they're that bad at modeling the markets.
  - bagacrap 6y ago
    yea, but they wouldn't have needed to sell 51,551,723 shares at that price, just 24,343,869
- AznHisoka 6y ago
  This is a market with a lot of froth and if they listed the price at $1 trillion, speculators would have bid it up to $2 trillion just because they want to sell it to a greater fool.
  - whimsicalism 6y ago
    Literally not how markets work, but okay.
    - AznHisoka 6y ago
grailed 6y ago
I hear a lot of talk surrounding their "moat" and many skeptics are questioning whether or not they will be able to maintain their competitive advantage. However, it feels like Airbnb has solved a truly hard problem: how to make people trust your service. People are using this app to go stay in random people's homes. How often do you hear people talk about being murdered in uber? I still hear it. How often do you hear it for Airbnb? I haven't heard someone express that worry yet. They've solved the trust and the brand issue, and _that_ is their moat.
- whimsicalism 6y ago
  I feel like this is not some great engineering feat with Airbnb and has much more to do with classism and the type of person who typically owns that beautiful vacation home you want to stay in.
  - ngold 6y ago
    I guess it would be more like renting someone's fancy car for a weekend.
  - FruityCoconut 6y ago
    Also you're unlikely to see the owner, they certainly won't be inside with you, you can leave any time, you're likely to be with others, and they can't change your location. Contrast that with an intoxicated young woman climbing alone into a stranger's car where he has a lot of control - including being able to lock the doors or take her to a remote/unfamiliar location. Even with all the checks and measures in place, assaults are not uncommon; I'm not familiar with any AirBnB type assaults (far more frequently, it's the guests victimising the owner via property damage).
    - WanderPanda 6y ago
      > they certainly won't be inside with you Not true, we once stayed in Pisa, Italy, and the (absolutely messy) appartment was shared with the host and her son. It was quite awkward at times but we still enjoyed the stay
solutron 6y ago
2x IPO strike price in first day of trading after $613M recouped stock options after the layoffs. Stock consolidation and 180 day lock up period creates a big risk for when employees sell. Lots of them probably have tens of thousands of shares, exercised them very cheaply, and will want to offload them. I'm not going to touch this stock with a 10-foot pole. I do wish I could short this stock but options aren't available for it yet.
- milkshakes 6y ago
  there is a 7 day exercise window currently in effect in which 15% of pre-tax awarded shares can be sold. early employees are able to sell, today through thursday. things look alright from here. there is another window for 25% after Q1 subject to performance. im not expecting a massive movement on the actual lockup expiration in may
- vageli 6y ago
  Many brokerages allow you to short the actual underlying, without resorting to options.
  - v64 6y ago
    This isn't possible so soon after the IPO as very few shares are currently available for shorting
    - Invictus0 6y ago
      Interactive brokers currently has over 280k shares available for short selling, at a fee rate of 0.25%.
      - zone411 6y ago
        Not anymore.
- toby 6y ago
  Everyone says this about the lock up and it makes sense intuitively, but it doesn't really match the data. I saw a presentation by a major investment bank that showed that in most cases there is not a significant drop following the lock up expiration -- I'm sure there are examples either way, but this was a compelling basket.
jpalmer 6y ago
Market cap now exceeds top 5 US hotel chains combined. How much can it grow from here?
- boberoni 6y ago
  Based on Airbnb's other product of "experiences", I could see them growing into the broader vacation industry. I remember a talk by Brian Chesky where he lamented the (pre-COVID) style of travel where tourists just herd into queues at mainstream tourist attractions. Airbnb experiences are supposed to subvert this and create an industry of tourism that is more serendipitous and less standardized.
  - thesimon 6y ago
    >Airbnb experiences are supposed to subvert this and create an industry of tourism that is more serendipitous and less standardized. Although the experiences I saw were either around (vegan) cooking and stuff or the general stuff that you can book at a normal tourist agency, just a lot more expensive. Nothing too interesting, just expensive but YMMV.
  - lawlorino 6y ago
    Yes this seems reasonable. I used to work for one of the main competitors of Airbnb and this was our strategy for growth outside of our core business of selling hotel "roomnights" until Covid hit. The margins on flights and attraction tickets are tiny as you might expect, but the idea was this would lead to more growth in our core business since it could all be tied together in one platform. There's also the less well defined but non-zero benefit of data, marketing and so on that this extra visibility provides.
    - giarc 6y ago
      Brian has talked about getting into flights in some capacity. I wonder if dealing with bookings is not their goal but imagine if they had Airbnb louges in major airports. Those traveling with an Airbnb stay booked could access the lounge free of charge. Sort of like a loss leader to promote downstream Airbnb bookings.
say_it_as_it_is 6y ago
25% of AirBnB staff was cut in 2020. Many may still be unemployed. For those who are struggling, please accept my deepest condolences at this time.
- pb7 6y ago
  All of whom got very generous severance packages that may extend through the end of the year and all of their vested equity is now worth a lot. I don't think they need your condolences.
Nelkins 6y ago
As someone whose main exposure to stocks is investing via retirement accounts, can someone explain if they're really leaving $4 billion on the table? Can't they just issue/sell more stock to drive down the price to their originally targeted price? Or is that some kind of breach of fiduciary duty (or something else)?
- dhnajsjdnd 6y ago
  When they issued shares in the IPO, that diluted existing shareholders. The only way to un-dilute them would be to buy back those shares (at current inflated prices). They could sell more shares, which would mean further dilution.
- pavlov 6y ago
  Yes, the company can do a secondary offering after its IPO, and it's pretty common. I think the hype around the IPO will help them do a secondary next year, so in that sense the low initial price is like a marketing tool for future stock. Also, Airbnb (like other tech companies) is issuing quite a lot of new stock in the form of RSUs used to pay employees. This constant dilution benefits from the high stock price.
  - jartelt 6y ago
    You don't leave billions on the table to generate hype. You could just as easily raise the extra billions in the IPO and then spend $100 million in ads to generate hype (and it would be much cheaper).
- jartelt 6y ago
  They sold X number of shares in the IPO at at $68 per share price and then the next morning, shares were selling at >$130 per share. The money left on the table is due to them selling at $68 when they likely could have sold for high (given the pent up demand). Some people argue that they wouldn't have been able to sell all X shares at $130 per share. That may be the case, but it's really hard not to think the $68 price was way too low. You can issue more shares to raise more money and drive the price down, but you never can undo the discount you gave the IPO investors.
mmaunder 6y ago
I haven’t been following this but isn’t this a value gap that is more like a chasm that whoever underwrote this captured at the cost of the business?
- colinmhayes 6y ago
  Yep, banks made a killing
ionwake 6y ago
As a great fan of airbnb having stayed 10 times in Denmark in different ones, I was suddenly burned by a fake review from a first time host ( she got into trouble with her housing association I think ). She destroyed my feedbacks "image" with made up statements in her statement. After several appeals airbnb did not help at all. I got so burned that I still don't quite understand whether I was unlucky or failed to reach the right person, but Ive been too taken aback to start again with a new profile.
- virgil_disgr4ce 6y ago
  My gf has had two shitty experiences with AirBnB's "community leaders" in response to two completely unjustified reviews of her place. Anybody can just suddenly decide that they had a terrible time and that it's the fault of the property, and AirBnB seems predisposed to take the visitors word for it. If they keep that up they're not going to have any renters.
  - ghaff 6y ago
    To be fair though, at least depending upon the details, what is AirBnB is supposed to do? If they remove negative reviews because they're outliers, that sounds like what people accuse Yelp of doing. A lot of complaints can be pretty subjective. It's also pretty common for marketplaces to take the side of buyers in general.
- ghaff 6y ago
  Dispute resolution at most marketplace and social media companies is pretty hit or miss in my experience. In general, you're not going to get a big time slice from whatever low-paid customer service rep you get assigned to. Maybe they'll make the right call and maybe they won't but any investigation is going to be pretty cursory. That's not to say stuff never gets fixed. A few months ago I had a random blog on posting to Twitter. No idea why and they did clear it after a few days. So things got fixed but it was very opaque. ADDED: And, to be fair, a lot of disputes can be a combination of he said/she said and different expectations. "My cheap Manhattan hotel room is tiny!" You don't say.
renewiltord 6y ago
Great company. Changed my traveling life. Way awesome for longer stays.
subsubzero 6y ago
Some of my experiences with airbnb, always a guest not an owner: Bads - Had a really bad house with cabinet doors torn off the cabinets, trash in the garage, place was a total dump. Stayed one day and got the rest of my money back. Another place had a bad mouse infestation, this was dealt with by the owner but it was still pretty shocking as I have never lived or stayed in a place that had a single mouse my entire life. Goods - Right before the pandemic hit had a really good string of excellent airbnbs that were all cancelled last minute, the thing with airbnb is, great places are always booked, we just got lucky as people were scared and stopped traveling(early march). Ugly - Alot of owners now are pulling a perfectly legal scam of listing a place at a certain price point and then charging an extremely high cleaning fee. When booking it, you are then shocked by the extreme fees, one place (5 days stay) was charging $400 for their cleaning fee. Takeaways - If you do your own cooking and don't mind cleaning up airbnb is great for you. As a parent its great as I don't have to deal with a hotel lobby or elevators(I always book standalone houses). As for price its roughly even with hotels, a few years back it was typically 40-50% cheaper.
- vmarsy 6y ago
  > Ugly - Alot of owners now are pulling a perfectly legal scam of listing a place at a certain price point and then charging an extremely high cleaning fee. When booking it, you are then shocked by the extreme fees, one place (5 days stay) was charging $400 for their cleaning fee. I'm not sure I follow here, the cleaning fee is announced before you confirm the booking isn't it? In a way it's similar to airlines having cheap tickets to then adding seat-choosing fee, bagage fee, etc. The initial low price is slightly deceptive to appear cheaper on aggregators, isn't it? Here the "scam" is they use same deceptive practice to appear cheaper on the Airbnb map? For any serious booking, people explore their options and open a few tabs of different listings to pick, since they have to check other things (smoker/non-smoker, pets/no pets, etc). The cleaning fee for the trip is listed there. Some owners prefer long term stays, so putting a flat higher cleaning fee is a good mechanism to incentivise longer stays imo, as yes, cleaning is time consuming. Maybe the Map itself could improve to show the total price for the trip instead of base-rate-per-night.
  - 6y ago
maybelsyrup 6y ago
I decided I'd had it with Airbnb a couple of years ago now and mostly haven't looked back. I prioritize more traditional hospitality options now. I'll save a long diatribe and instead say that when I added up the little details I didn't like about the platform, and the ways I'd fix them, I'd "invented" ... a hotel. It may be my age now (over 30), but I've come to value knowing that Hilton uses a certain type of bedsheet in all their rooms over "Alfred's converted garage looks like it has a quirky sense of style!" I'll hand it to Airbnb on this though: the "experiences" feature they introduced right as I was getting fed up with them is pretty neat.
- deleted 6y ago
  [deleted]
- titanomachy 6y ago
  > It may be my age now I assume it's probably in part an increase in wealth as you've gotten older. I think a Hilton is normally upwards of $200 a night, plus $50 per night for parking ($1400-1750 depending if you have a car). The average American earns $900 per week and is probably not dropping that kind of money on a hotel. They're also pretty geared towards business travelers, with lots of premium conveniences that aren't needed by someone traveling to visit friends or something. For example, I usually prefer a basic kitchen with a fridge rather than room service for $40 per meal. I'll happily take the room service if I have work to do and my employer is paying, though.
  - worker767424 6y ago
    > The average American earns $900 per week and is probably not dropping that kind of money on a hotel. The average American making $900 per week doesn't normally go places that charge $50 a night for parking. Apparently parking at the Omaha Hilton is $15 per night. If I'm price-conscious, all else being equal, I'd still prefer a Super 8 to an Airbnb because it might not be nice, but it won't be bad, and the variance between room and service quality across all their properties is pretty small, so I won't be surprised by anything. That, and if you're price-conscious, a bad Airbnb experience is expensive to fix; you just finished traveling, you want your room now, 3 hours and 4 phone calls later. Don't book an Airbnb unless you have a backup hotel to go to.
vvilliam0 6y ago
Airbnb is great until you get a bad experience. For hotels, there is a floor for bad experiences - it can only get so bad, and the customer service is usually decent. I used airbnb until I had a single terrible experience and worse customer service that did not help me because I had no proof of the incident. Been using hotels ever since.
- pm90 6y ago
  They will churn through new customers who get bitten by this until they come up with controls/features that prevent it. Instituting those will increase the price making them less competitive and opening the door to others. Its quite amusing how much the gig economy is hyped up but besides the initial surge of excitement, it just settles down and looks like the industry its trying to replace. But I'm a pessimist. Maybe they will use the infusion of cash to invest in something truly groundbreaking. But I'm staying far far away from making any investments in them.
  - therealx 6y ago
    It's often worse than what it replaced, too. Uber did well because the Taxi industry already had gone to such low low's, but the gig economy feels synonomous with an excuse to pay less than minimum wage to me.
    - gotostatement 6y ago
      low pay + no benefits
ghufran_syed 6y ago
I pretty much stopped using Airbnb after getting a bad review from a host for “not tidying up” - what exactly is the large cleaning fee for? So paying almost hotel prices for less than hotel level service seems like a pretty bad deal. Particularly when the host wants you to also jump through hoops to avoid getting busted by the homeowners or tenants association...
- therealx 6y ago
  I absolutely hate that. I've had AirBNB's tell me to take out the trash and the full gamet before leaving while still charging me $30 to clean. I refused.
11thEarlOfMar 6y ago
I recall that Facebook's first day closed at or near the offer price: Opened at $38 and closed at $38.23. That's a masterful IPO pricing accomplishment, meaning, FB left $0.23 per share on the table. Moreover, the stock traded below the open for 5 quarters before starting it's impressive rise. Even with that pause, buying at the open and holding till now would have yielded nearly 27% annualized return. It's just my opinion, but ABNB missing by more than 100% ($140 close vs. $68 open) is a major fail on the part of their CFO. https://www.businessinsider.com/facebook-stock-price-ipo-6th-anniversary-2018-5 https://www.businessinsider.com/facebook-stock-price-ipo-6th...
- chasedehan 6y ago
  This was the second largest "money left on the table" from an IPO. Jay Ritter's document shows how much AirBNB could have picked up if they had priced their IPO appropriately. https://site.warrington.ufl.edu/ritter/files/Monnew.pdf https://site.warrington.ufl.edu/ritter/files/Monnew.pdf
  - say_it_as_it_is 6y ago
    Can someone please explain the winners and losers of this $3.9 Billion discrepancy?
    - tyre 6y ago
      AirBnB is the loser; people who bought at the IPO price are the winners. Let's say a company IPOs by selling 1,000 shares at $1/share. An investor buys them all. Opening bell rings and demand let's that investor sell shares at $2/share. So the company sold 1,000 shares for half of what people were willing to pay. The investor bought shares at half the price they could sell them for.
    - lozaning 6y ago
      AirBnB is the loser because they could have gotten that money, the people who got to buy at the initial IPO price are the winners because they got those billions. This is akin to AirBNB selling dollars for 50 cents.
fossuser 6y ago
Another strong argument in favor of doing a direct listing to determine market price (and raising privately beforehand if possible). Anytime one party does a transaction repeatedly as their job and one party does a transaction once (maybe twice) in their life, the transaction will be structured to favor the first group (along with a compelling narrative/PR of why this is not the case). Airbnb lost out here. It's easy to discount since people are happy to have made money, but I'm not sure this was a stunning IPO considering that. If I was on the company side, I'd be pissed at the initial pricing and the money that was left on the table. The counter narrative is that pricing is hard and the banks try to do the best they can (with a slight preference for under pricing to benefit themselves). This is probably closer to the truth, but there's a lot of evidence that they're just not good at it. It'd be interesting to see some clause that if the banks mis-priced by some X% the partners would have to sell and give 50% back to the company. Though I suspect even this wouldn't help because market price is hard to predict even if you're incentivized to try your best. https://podcasts.apple.com/us/podcast/bill-gurley-direct-listing-vs-ipo-invest-like-the-best-ep-144/id1154105909?i=1000451016956 https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis...
- cactus2093 6y ago
  > If I was on the company side, I'd be pissed at the initial pricing and the money that was left on the table. Eh, would you really though? I suppose maybe a maniacally focused founder or CEO might. But anyone in a position to be involved in these decisions has a huge personal stake in the situation. If I thought I was going to make $100M and instead I made $200M, it's hard to imagine being mad at the bankers for leaving the company's money on the table. But maybe that's why I'm not a big company executive. But anyway, the flip side of a transaction that is incredibly important and you do only once, is that if you go against the norm and it goes badly, it could go very badly and you might not get a redo. If you go along with the experts, you are genuinely probably taking less risk.
  - fossuser 6y ago
    Which is how it ends up structured to benefit the bankers. People who only do something once or twice are more likely to defer to the 'experts', the only problem is the experts have their own incentives that are not directly aligned. The experts are also really good at selling since that's mostly their job so it makes it even harder to go against the grain. I get why founders do it, but I think it's a mistake. Founders are also usually pretty good at first principles thinking and risk taking. DPO is also pretty solid ground now that a few companies have done it. > "Eh, would you really though?" Impossible to know, but I think so? After you're worth 5+ Billion it's more about money you can leverage via your company to grow and build. I think personal wealth has diminishing returns a bit before that point. Losing out on that much money for the company would irritate me. There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low.
pfarnsworth 6y ago
The reaction of the markets to Airbnb's IPO is definitely an echo of the dotcom days. The only question is, is Airbnb's IPO equivalent to Netscape (ie. near the beginning of the boom) or Pets.com (near the end). Only time will tell I suppose.
jariel 6y ago
AirBnB units should have to pay the same tax burden as any other accommodation. Then we can see how that works with their margins.
michaelyoshika 6y ago
All my experiences using Airbnb have been terrible and their apps/website are the slowest I've ever seen in a tech company. But I think the price is reasonable because the Fed printing machine won't stop and US has long lost the opportunity to ever increase interest rate so everything will just pop up like end of world, e.g. what has Apple done this year so they are now worth 1 trillion more than last year? Thus 60b for Airbnb is basically the same as 30b last year. tl;dr: if your asset doesn't pop 100% this year, you are a fool.
- JanisL 6y ago
  This IPO does have a bit of a Cantillon Effect feeling to it now that you mention this.
djtriptych 6y ago
I bought at $146 and feel ok at that price for a long play. I see regulation as the major risk. But getting millions of people to trust you with their homes is one hell of a moat. Everything about the post-pandemic world favors AirBNB. - Remote/Mobile workers. That alone is gonna make them an incredible amount of money. This isn't ever going to change. - Pandemic housing boom. People are buying at unprecedented rates. This is money leaving cities. This is a generation of global-minded, young internet-savvy buyers. AirBNB wins here. - Economic recession / unemployment. Everyone who _does_ own a home and finds themselves in financial trouble is going to consider renting a room. It's an obvious move and I think the job market will have at-risk homeowners considering this move en masse.
- HexagonalKitten 6y ago
  Assuming their costs are about 50%, and that they need to make ~$8B profit / year, they'd need to collect $16B to make $8B, so that's about $100B in rentals at 15% take. Plausible, because the USA alone is ~$90B, but why does it seem stable? If AirBNB starts to charge enough to make $8B profit per year why wouldn't you rent your suite with VRBO? The margins can get paper thin because nobody seems to want the profitable extras - just CC processing and a listings site. I know people who rent vacation property and they do not lack for potential customers. They're on all the services, but also Craigslist, etc. They value the services for easier money handling, slightly less customer service required, and a few smaller things. But certainly not enough to warrant more than a 5% cut, but ~15% seems more common. This seems to usually be obfuscated by charging the guest, not the host, but it's still money that's not on the table for them. They often break the rules to deal with this by suggesting customers contact them directly and pay by money transfer, so the industry is already price conscious and willing to undercut partners. Not a friendly place to expand into. And customers tend to price conscious and shop around, so it seems likely to stay this way. Uber, to contrast, benefits from their network effect because most customers are time, not price, conscious and thus only check one service. For AirBNB you have months to shop around and contact the host out of band.
JumpCrisscross 6y ago
It’s SoftBank. Retail is being blamed. But there aren’t enough retail dollars, nor enough odd-lot trading, to explain these deltas.
mattsoldo 6y ago
It is a misconception that when a company IPOs and the stock pops, that the delta is money left on the table. The vast majority of the shares are sold to institutional investors. There are explicit or implicit lock-up periods in place. And most of the pre-IPO investors will typically have a 6-month lockup. So if 10% of shares are sold in the IPO and 10% of those shares are actually trade-able, only 1% of the total stock is liquid. That can lead to very large price swings (i.e. the pop).
NiceWayToDoIT 6y ago
What is the danger of IPO being significantly higher than estimated?

137 points by benoitg 6y ago

For some reason, I just feel this price is too high for them and that it will fall in the coming 2-3 months. Then again, I think about their business model and there’s a lot to like: the don’t own any real estate and if they really wanted to, they could likely let go most of their staff and have a team of maybe 60 - 100 people run the bussiness as it mostly revolves around simply managing the app and keeping it running. I’m curious how “Moated” their bussiness will turn out to be. I don’t really see competition will cut in that much as Airbnb has such an head start and established brand. The only big question I have left is legality. My family works in the hotel bussiness and is required to do fire alarm checks and all sorts of other checks to prove that he is safe to customers. Will Airbnb one day be required to do this? Only time will tell.

loufe 6y ago
60-100 staff? Sorry but that's very naïve. Think about how many core services this takes: -finance -payment -HR -management -verification of hosts / properties -scam detection and moderation -legal -dispute arbitration -programming -infrastructure -projects -building management for properties like HQ they own -customer service -etc. They'd be lucky to get away with a couple multiples of your guess. This isn't netflix, there are far more facets to operations.
- sida 6y ago
  I agreed with everything until Netflix. Netflix is incredibly complex. But yes, we can all agree that these take a lot of people to run
  - borroka 6y ago
    Netflix is complex and they also have entire teams whose effect on the product or business is zero or negative. Almost all companies are inefficient in different ways.
- burkaman 6y ago
  Also monitoring laws and taxes in every municipality in the world. Maintaining the app is by far the simplest and easiest part of their business.
- thebean11 6y ago
  > This isn't netflix, there are far more facets to operations. With Netflix I think you need to count the content creators, since first party content is the majority these days.
- polote 6y ago
  > 60-100 staff? Sorry but that's very naïve. Think about how many core services this takes: I agree, but the engineering department could be handled with less than 50 people. Most of the work they do is linked to operation stuff and not engineering
  - patothon 6y ago
    the parent explained how it was impossible to get to that low of a number: -finance -payment -HR -management -verification of hosts / properties -scam detection and moderation -legal -dispute arbitration -programming -infrastructure -projects -building management for properties like HQ they own -customer service -etc. This represent so many people.
    - jbverschoor 6y ago
      But they don't even have "customer service"
    - AnimalMuppet 6y ago
      polote said "engineering". You responded by listing a bunch of non-engineering jobs that need done. OK, but you're arguing with something that is not what polote said.
      - patothon 6y ago
        these are not non-engineering jobs to be done, these are internal and external products to build.
sida 6y ago
This comes up a lot (ohh it is a just a crud app and you just need a couple of people) This is fine and it is common misconception about how large app businesses work. (kudos to airbnb for making complex things look so simple) Here is a great post about Uber and why Uber gets complex (once you have many product lines across hundreds of cities, each with their own subtleties and rules/regulations) https://news.ycombinator.com/item?id=25376346 https://news.ycombinator.com/item?id=25376346
victor106 6y ago
Aswath Damodaran's analysis. http://aswathdamodaran.blogspot.com/2020/12/the-sharing-economy-come-home-ipo-of.html http://aswathdamodaran.blogspot.com/2020/12/the-sharing-econ... TLDR;The per share value based upon the latest share count is about $54/share.
treis 6y ago
>For some reason, I just feel this price is too high for them and that it will fall in the coming 2-3 months. They've got a lot going for them they are: A verb now like Google or Zoom. The dominant player in a global 2 sided market Potential major competitors (i.e. AirBnB by Marriott) are blocked by legal complications They're going to be very profitable for a long time. A 100billion valuation is a tall order as it implies that, at some point, you start generating 10 billion a year or so in cash flow. But I can see them doing that.
- giarc 6y ago
  Becoming a verb can be hit or miss. Take for example Kleenex. If I say to you, "can you grab me a box of Kleenex at the store" you don't instinctively buy Kleenex brand, you buy whatever is on sale/stands out/is your regular brand.
  - treis 6y ago
    Kleenex has been the leader in their segment for a century now and has half the market.

zwieback 6y ago

and I thought they were struggling because everyone is staying home due to Covid...

whimsicalism 6y ago
I think the interior of America has given up on distancing.
- tudelo 6y ago
  To be fair... you can stay at an airbnb and still be completely distanced from the owner of said airbnb. Yeah, you have to travel, but for many this is also possible without any close contact.
  - whimsicalism 6y ago
    I can't guarantee, but my bet is the majority of people vacationing in Airbnbs aren't being distant. The marginal impact on deaths now is probably lower than it was in March, but only barely.
    - zeroonetwothree 6y ago
      I’ve stayed in Airbnbs many times (zero since March) and have not even once met my host in person.
      - whimsicalism 6y ago
        I'm not talking about interaction with the host, I'm talking about the general risks of traveling and then going to a new place where you are interacting with the people shortly after traveling. My claim is that most of these people are not going on exclusively nature-exploration vacations, they are going to see people or to patronize their businesses.
- rezz 6y ago
  Maybe ease up on the costal holier than thou sentiment. I’m in Miami right now and 90% of the people I’ve met are tech / finance types from NYC doing blow inside of clubs until 4am.

boringg 6y ago

Talk about setting the wrong price for their stock. Looks like airbnb just handed over boatloads of money to wall street.

deleted 6y ago
[deleted]
fennecfoxen 6y ago
They already priced well above the expected range. It's highly unlikely they would have been able find subscribers for the 51,551,723 shares of the offering at the post-IPO price, before the IPO.
- whimsicalism 6y ago
  > It's highly unlikely they would have been able find subscribers for the 51,551,723 shares of the offering at the post-IPO price, before the IPO. I don't believe that. They opened at $140 but couldn't have found subscribers for anything more than $68? I don't think they're that bad at modeling the markets.
- bagacrap 6y ago
  yea, but they wouldn't have needed to sell 51,551,723 shares at that price, just 24,343,869
AznHisoka 6y ago
This is a market with a lot of froth and if they listed the price at $1 trillion, speculators would have bid it up to $2 trillion just because they want to sell it to a greater fool.
- whimsicalism 6y ago
  Literally not how markets work, but okay.
  - AznHisoka 6y ago

grailed 6y ago

I hear a lot of talk surrounding their "moat" and many skeptics are questioning whether or not they will be able to maintain their competitive advantage. However, it feels like Airbnb has solved a truly hard problem: how to make people trust your service. People are using this app to go stay in random people's homes. How often do you hear people talk about being murdered in uber? I still hear it. How often do you hear it for Airbnb? I haven't heard someone express that worry yet. They've solved the trust and the brand issue, and _that_ is their moat.

whimsicalism 6y ago
I feel like this is not some great engineering feat with Airbnb and has much more to do with classism and the type of person who typically owns that beautiful vacation home you want to stay in.
- ngold 6y ago
  I guess it would be more like renting someone's fancy car for a weekend.
- FruityCoconut 6y ago
  Also you're unlikely to see the owner, they certainly won't be inside with you, you can leave any time, you're likely to be with others, and they can't change your location. Contrast that with an intoxicated young woman climbing alone into a stranger's car where he has a lot of control - including being able to lock the doors or take her to a remote/unfamiliar location. Even with all the checks and measures in place, assaults are not uncommon; I'm not familiar with any AirBnB type assaults (far more frequently, it's the guests victimising the owner via property damage).
  - WanderPanda 6y ago
    > they certainly won't be inside with you Not true, we once stayed in Pisa, Italy, and the (absolutely messy) appartment was shared with the host and her son. It was quite awkward at times but we still enjoyed the stay

solutron 6y ago

2x IPO strike price in first day of trading after $613M recouped stock options after the layoffs. Stock consolidation and 180 day lock up period creates a big risk for when employees sell. Lots of them probably have tens of thousands of shares, exercised them very cheaply, and will want to offload them. I'm not going to touch this stock with a 10-foot pole. I do wish I could short this stock but options aren't available for it yet.

milkshakes 6y ago
there is a 7 day exercise window currently in effect in which 15% of pre-tax awarded shares can be sold. early employees are able to sell, today through thursday. things look alright from here. there is another window for 25% after Q1 subject to performance. im not expecting a massive movement on the actual lockup expiration in may
vageli 6y ago
Many brokerages allow you to short the actual underlying, without resorting to options.
- v64 6y ago
  This isn't possible so soon after the IPO as very few shares are currently available for shorting
  - Invictus0 6y ago
    Interactive brokers currently has over 280k shares available for short selling, at a fee rate of 0.25%.
    - zone411 6y ago
      Not anymore.
toby 6y ago
Everyone says this about the lock up and it makes sense intuitively, but it doesn't really match the data. I saw a presentation by a major investment bank that showed that in most cases there is not a significant drop following the lock up expiration -- I'm sure there are examples either way, but this was a compelling basket.

jpalmer 6y ago

Market cap now exceeds top 5 US hotel chains combined. How much can it grow from here?

boberoni 6y ago
Based on Airbnb's other product of "experiences", I could see them growing into the broader vacation industry. I remember a talk by Brian Chesky where he lamented the (pre-COVID) style of travel where tourists just herd into queues at mainstream tourist attractions. Airbnb experiences are supposed to subvert this and create an industry of tourism that is more serendipitous and less standardized.
- thesimon 6y ago
  >Airbnb experiences are supposed to subvert this and create an industry of tourism that is more serendipitous and less standardized. Although the experiences I saw were either around (vegan) cooking and stuff or the general stuff that you can book at a normal tourist agency, just a lot more expensive. Nothing too interesting, just expensive but YMMV.
- lawlorino 6y ago
  Yes this seems reasonable. I used to work for one of the main competitors of Airbnb and this was our strategy for growth outside of our core business of selling hotel "roomnights" until Covid hit. The margins on flights and attraction tickets are tiny as you might expect, but the idea was this would lead to more growth in our core business since it could all be tied together in one platform. There's also the less well defined but non-zero benefit of data, marketing and so on that this extra visibility provides.
  - giarc 6y ago
    Brian has talked about getting into flights in some capacity. I wonder if dealing with bookings is not their goal but imagine if they had Airbnb louges in major airports. Those traveling with an Airbnb stay booked could access the lounge free of charge. Sort of like a loss leader to promote downstream Airbnb bookings.

say_it_as_it_is 6y ago

25% of AirBnB staff was cut in 2020. Many may still be unemployed. For those who are struggling, please accept my deepest condolences at this time.

pb7 6y ago
All of whom got very generous severance packages that may extend through the end of the year and all of their vested equity is now worth a lot. I don't think they need your condolences.

Nelkins 6y ago

As someone whose main exposure to stocks is investing via retirement accounts, can someone explain if they're really leaving $4 billion on the table? Can't they just issue/sell more stock to drive down the price to their originally targeted price? Or is that some kind of breach of fiduciary duty (or something else)?

dhnajsjdnd 6y ago
When they issued shares in the IPO, that diluted existing shareholders. The only way to un-dilute them would be to buy back those shares (at current inflated prices). They could sell more shares, which would mean further dilution.
pavlov 6y ago
Yes, the company can do a secondary offering after its IPO, and it's pretty common. I think the hype around the IPO will help them do a secondary next year, so in that sense the low initial price is like a marketing tool for future stock. Also, Airbnb (like other tech companies) is issuing quite a lot of new stock in the form of RSUs used to pay employees. This constant dilution benefits from the high stock price.
- jartelt 6y ago
  You don't leave billions on the table to generate hype. You could just as easily raise the extra billions in the IPO and then spend $100 million in ads to generate hype (and it would be much cheaper).
jartelt 6y ago
They sold X number of shares in the IPO at at $68 per share price and then the next morning, shares were selling at >$130 per share. The money left on the table is due to them selling at $68 when they likely could have sold for high (given the pent up demand). Some people argue that they wouldn't have been able to sell all X shares at $130 per share. That may be the case, but it's really hard not to think the $68 price was way too low. You can issue more shares to raise more money and drive the price down, but you never can undo the discount you gave the IPO investors.

mmaunder 6y ago

I haven’t been following this but isn’t this a value gap that is more like a chasm that whoever underwrote this captured at the cost of the business?

colinmhayes 6y ago
Yep, banks made a killing

ionwake 6y ago

As a great fan of airbnb having stayed 10 times in Denmark in different ones, I was suddenly burned by a fake review from a first time host ( she got into trouble with her housing association I think ). She destroyed my feedbacks "image" with made up statements in her statement. After several appeals airbnb did not help at all. I got so burned that I still don't quite understand whether I was unlucky or failed to reach the right person, but Ive been too taken aback to start again with a new profile.

virgil_disgr4ce 6y ago
My gf has had two shitty experiences with AirBnB's "community leaders" in response to two completely unjustified reviews of her place. Anybody can just suddenly decide that they had a terrible time and that it's the fault of the property, and AirBnB seems predisposed to take the visitors word for it. If they keep that up they're not going to have any renters.
- ghaff 6y ago
  To be fair though, at least depending upon the details, what is AirBnB is supposed to do? If they remove negative reviews because they're outliers, that sounds like what people accuse Yelp of doing. A lot of complaints can be pretty subjective. It's also pretty common for marketplaces to take the side of buyers in general.
ghaff 6y ago
Dispute resolution at most marketplace and social media companies is pretty hit or miss in my experience. In general, you're not going to get a big time slice from whatever low-paid customer service rep you get assigned to. Maybe they'll make the right call and maybe they won't but any investigation is going to be pretty cursory. That's not to say stuff never gets fixed. A few months ago I had a random blog on posting to Twitter. No idea why and they did clear it after a few days. So things got fixed but it was very opaque. ADDED: And, to be fair, a lot of disputes can be a combination of he said/she said and different expectations. "My cheap Manhattan hotel room is tiny!" You don't say.

renewiltord 6y ago

Great company. Changed my traveling life. Way awesome for longer stays.

subsubzero 6y ago

Some of my experiences with airbnb, always a guest not an owner: Bads - Had a really bad house with cabinet doors torn off the cabinets, trash in the garage, place was a total dump. Stayed one day and got the rest of my money back. Another place had a bad mouse infestation, this was dealt with by the owner but it was still pretty shocking as I have never lived or stayed in a place that had a single mouse my entire life. Goods - Right before the pandemic hit had a really good string of excellent airbnbs that were all cancelled last minute, the thing with airbnb is, great places are always booked, we just got lucky as people were scared and stopped traveling(early march). Ugly - Alot of owners now are pulling a perfectly legal scam of listing a place at a certain price point and then charging an extremely high cleaning fee. When booking it, you are then shocked by the extreme fees, one place (5 days stay) was charging $400 for their cleaning fee. Takeaways - If you do your own cooking and don't mind cleaning up airbnb is great for you. As a parent its great as I don't have to deal with a hotel lobby or elevators(I always book standalone houses). As for price its roughly even with hotels, a few years back it was typically 40-50% cheaper.

vmarsy 6y ago
> Ugly - Alot of owners now are pulling a perfectly legal scam of listing a place at a certain price point and then charging an extremely high cleaning fee. When booking it, you are then shocked by the extreme fees, one place (5 days stay) was charging $400 for their cleaning fee. I'm not sure I follow here, the cleaning fee is announced before you confirm the booking isn't it? In a way it's similar to airlines having cheap tickets to then adding seat-choosing fee, bagage fee, etc. The initial low price is slightly deceptive to appear cheaper on aggregators, isn't it? Here the "scam" is they use same deceptive practice to appear cheaper on the Airbnb map? For any serious booking, people explore their options and open a few tabs of different listings to pick, since they have to check other things (smoker/non-smoker, pets/no pets, etc). The cleaning fee for the trip is listed there. Some owners prefer long term stays, so putting a flat higher cleaning fee is a good mechanism to incentivise longer stays imo, as yes, cleaning is time consuming. Maybe the Map itself could improve to show the total price for the trip instead of base-rate-per-night.
- 6y ago

maybelsyrup 6y ago

I decided I'd had it with Airbnb a couple of years ago now and mostly haven't looked back. I prioritize more traditional hospitality options now. I'll save a long diatribe and instead say that when I added up the little details I didn't like about the platform, and the ways I'd fix them, I'd "invented" ... a hotel. It may be my age now (over 30), but I've come to value knowing that Hilton uses a certain type of bedsheet in all their rooms over "Alfred's converted garage looks like it has a quirky sense of style!" I'll hand it to Airbnb on this though: the "experiences" feature they introduced right as I was getting fed up with them is pretty neat.

deleted 6y ago
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titanomachy 6y ago
> It may be my age now I assume it's probably in part an increase in wealth as you've gotten older. I think a Hilton is normally upwards of $200 a night, plus $50 per night for parking ($1400-1750 depending if you have a car). The average American earns $900 per week and is probably not dropping that kind of money on a hotel. They're also pretty geared towards business travelers, with lots of premium conveniences that aren't needed by someone traveling to visit friends or something. For example, I usually prefer a basic kitchen with a fridge rather than room service for $40 per meal. I'll happily take the room service if I have work to do and my employer is paying, though.
- worker767424 6y ago
  > The average American earns $900 per week and is probably not dropping that kind of money on a hotel. The average American making $900 per week doesn't normally go places that charge $50 a night for parking. Apparently parking at the Omaha Hilton is $15 per night. If I'm price-conscious, all else being equal, I'd still prefer a Super 8 to an Airbnb because it might not be nice, but it won't be bad, and the variance between room and service quality across all their properties is pretty small, so I won't be surprised by anything. That, and if you're price-conscious, a bad Airbnb experience is expensive to fix; you just finished traveling, you want your room now, 3 hours and 4 phone calls later. Don't book an Airbnb unless you have a backup hotel to go to.

vvilliam0 6y ago

Airbnb is great until you get a bad experience. For hotels, there is a floor for bad experiences - it can only get so bad, and the customer service is usually decent. I used airbnb until I had a single terrible experience and worse customer service that did not help me because I had no proof of the incident. Been using hotels ever since.

pm90 6y ago
They will churn through new customers who get bitten by this until they come up with controls/features that prevent it. Instituting those will increase the price making them less competitive and opening the door to others. Its quite amusing how much the gig economy is hyped up but besides the initial surge of excitement, it just settles down and looks like the industry its trying to replace. But I'm a pessimist. Maybe they will use the infusion of cash to invest in something truly groundbreaking. But I'm staying far far away from making any investments in them.
- therealx 6y ago
  It's often worse than what it replaced, too. Uber did well because the Taxi industry already had gone to such low low's, but the gig economy feels synonomous with an excuse to pay less than minimum wage to me.
  - gotostatement 6y ago
    low pay + no benefits

ghufran_syed 6y ago

I pretty much stopped using Airbnb after getting a bad review from a host for “not tidying up” - what exactly is the large cleaning fee for? So paying almost hotel prices for less than hotel level service seems like a pretty bad deal. Particularly when the host wants you to also jump through hoops to avoid getting busted by the homeowners or tenants association...

therealx 6y ago
I absolutely hate that. I've had AirBNB's tell me to take out the trash and the full gamet before leaving while still charging me $30 to clean. I refused.

11thEarlOfMar 6y ago

I recall that Facebook's first day closed at or near the offer price: Opened at $38 and closed at $38.23. That's a masterful IPO pricing accomplishment, meaning, FB left $0.23 per share on the table. Moreover, the stock traded below the open for 5 quarters before starting it's impressive rise. Even with that pause, buying at the open and holding till now would have yielded nearly 27% annualized return. It's just my opinion, but ABNB missing by more than 100% ($140 close vs. $68 open) is a major fail on the part of their CFO. https://www.businessinsider.com/facebook-stock-price-ipo-6th-anniversary-2018-5 https://www.businessinsider.com/facebook-stock-price-ipo-6th...

chasedehan 6y ago
This was the second largest "money left on the table" from an IPO. Jay Ritter's document shows how much AirBNB could have picked up if they had priced their IPO appropriately. https://site.warrington.ufl.edu/ritter/files/Monnew.pdf https://site.warrington.ufl.edu/ritter/files/Monnew.pdf
- say_it_as_it_is 6y ago
  Can someone please explain the winners and losers of this $3.9 Billion discrepancy?
  - tyre 6y ago
    AirBnB is the loser; people who bought at the IPO price are the winners. Let's say a company IPOs by selling 1,000 shares at $1/share. An investor buys them all. Opening bell rings and demand let's that investor sell shares at $2/share. So the company sold 1,000 shares for half of what people were willing to pay. The investor bought shares at half the price they could sell them for.
  - lozaning 6y ago
    AirBnB is the loser because they could have gotten that money, the people who got to buy at the initial IPO price are the winners because they got those billions. This is akin to AirBNB selling dollars for 50 cents.

fossuser 6y ago

Another strong argument in favor of doing a direct listing to determine market price (and raising privately beforehand if possible). Anytime one party does a transaction repeatedly as their job and one party does a transaction once (maybe twice) in their life, the transaction will be structured to favor the first group (along with a compelling narrative/PR of why this is not the case). Airbnb lost out here. It's easy to discount since people are happy to have made money, but I'm not sure this was a stunning IPO considering that. If I was on the company side, I'd be pissed at the initial pricing and the money that was left on the table. The counter narrative is that pricing is hard and the banks try to do the best they can (with a slight preference for under pricing to benefit themselves). This is probably closer to the truth, but there's a lot of evidence that they're just not good at it. It'd be interesting to see some clause that if the banks mis-priced by some X% the partners would have to sell and give 50% back to the company. Though I suspect even this wouldn't help because market price is hard to predict even if you're incentivized to try your best. https://podcasts.apple.com/us/podcast/bill-gurley-direct-listing-vs-ipo-invest-like-the-best-ep-144/id1154105909?i=1000451016956 https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis...

cactus2093 6y ago
> If I was on the company side, I'd be pissed at the initial pricing and the money that was left on the table. Eh, would you really though? I suppose maybe a maniacally focused founder or CEO might. But anyone in a position to be involved in these decisions has a huge personal stake in the situation. If I thought I was going to make $100M and instead I made $200M, it's hard to imagine being mad at the bankers for leaving the company's money on the table. But maybe that's why I'm not a big company executive. But anyway, the flip side of a transaction that is incredibly important and you do only once, is that if you go against the norm and it goes badly, it could go very badly and you might not get a redo. If you go along with the experts, you are genuinely probably taking less risk.
- fossuser 6y ago
  Which is how it ends up structured to benefit the bankers. People who only do something once or twice are more likely to defer to the 'experts', the only problem is the experts have their own incentives that are not directly aligned. The experts are also really good at selling since that's mostly their job so it makes it even harder to go against the grain. I get why founders do it, but I think it's a mistake. Founders are also usually pretty good at first principles thinking and risk taking. DPO is also pretty solid ground now that a few companies have done it. > "Eh, would you really though?" Impossible to know, but I think so? After you're worth 5+ Billion it's more about money you can leverage via your company to grow and build. I think personal wealth has diminishing returns a bit before that point. Losing out on that much money for the company would irritate me. There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low.

pfarnsworth 6y ago

The reaction of the markets to Airbnb's IPO is definitely an echo of the dotcom days. The only question is, is Airbnb's IPO equivalent to Netscape (ie. near the beginning of the boom) or Pets.com (near the end). Only time will tell I suppose.

jariel 6y ago

AirBnB units should have to pay the same tax burden as any other accommodation. Then we can see how that works with their margins.

michaelyoshika 6y ago

All my experiences using Airbnb have been terrible and their apps/website are the slowest I've ever seen in a tech company. But I think the price is reasonable because the Fed printing machine won't stop and US has long lost the opportunity to ever increase interest rate so everything will just pop up like end of world, e.g. what has Apple done this year so they are now worth 1 trillion more than last year? Thus 60b for Airbnb is basically the same as 30b last year. tl;dr: if your asset doesn't pop 100% this year, you are a fool.

JanisL 6y ago
This IPO does have a bit of a Cantillon Effect feeling to it now that you mention this.

djtriptych 6y ago

I bought at $146 and feel ok at that price for a long play. I see regulation as the major risk. But getting millions of people to trust you with their homes is one hell of a moat. Everything about the post-pandemic world favors AirBNB. - Remote/Mobile workers. That alone is gonna make them an incredible amount of money. This isn't ever going to change. - Pandemic housing boom. People are buying at unprecedented rates. This is money leaving cities. This is a generation of global-minded, young internet-savvy buyers. AirBNB wins here. - Economic recession / unemployment. Everyone who _does_ own a home and finds themselves in financial trouble is going to consider renting a room. It's an obvious move and I think the job market will have at-risk homeowners considering this move en masse.

HexagonalKitten 6y ago
Assuming their costs are about 50%, and that they need to make ~$8B profit / year, they'd need to collect $16B to make $8B, so that's about $100B in rentals at 15% take. Plausible, because the USA alone is ~$90B, but why does it seem stable? If AirBNB starts to charge enough to make $8B profit per year why wouldn't you rent your suite with VRBO? The margins can get paper thin because nobody seems to want the profitable extras - just CC processing and a listings site. I know people who rent vacation property and they do not lack for potential customers. They're on all the services, but also Craigslist, etc. They value the services for easier money handling, slightly less customer service required, and a few smaller things. But certainly not enough to warrant more than a 5% cut, but ~15% seems more common. This seems to usually be obfuscated by charging the guest, not the host, but it's still money that's not on the table for them. They often break the rules to deal with this by suggesting customers contact them directly and pay by money transfer, so the industry is already price conscious and willing to undercut partners. Not a friendly place to expand into. And customers tend to price conscious and shop around, so it seems likely to stay this way. Uber, to contrast, benefits from their network effect because most customers are time, not price, conscious and thus only check one service. For AirBNB you have months to shop around and contact the host out of band.

JumpCrisscross 6y ago

It’s SoftBank. Retail is being blamed. But there aren’t enough retail dollars, nor enough odd-lot trading, to explain these deltas.

mattsoldo 6y ago

It is a misconception that when a company IPOs and the stock pops, that the delta is money left on the table. The vast majority of the shares are sold to institutional investors. There are explicit or implicit lock-up periods in place. And most of the pre-IPO investors will typically have a 6-month lockup. So if 10% of shares are sold in the IPO and 10% of those shares are actually trade-able, only 1% of the total stock is liquid. That can lead to very large price swings (i.e. the pop).

NiceWayToDoIT 6y ago

What is the danger of IPO being significantly higher than estimated?