The Sharing Economy come home: The IPO of Airbnb!

This post is by Aswath Damodaran from Musings on Markets

On Monday, November 16, Airbnb filed it’s preliminary prospectus with the SEC, starting the clock on its long awaited initial public offering. On the same day, rising COVID cases caused more shut downs and restrictions around the world, creating a clear disconnect. Why would a company that derives its value from short term rentals by people who travel want to go public, when a out-of-control virus is causing its business to shut down? In this post, I will argue that there are good reasons for Airbnb’s IPO timing, and make my first attempt at valuing this latest entrant into public markets.

Setting the Table

As with any valuation, the first step in valuing Airbnb is trying to understand its history and its business model, including how it has navigated the economic consequences of the COVID. In this section, I will start with a  brief history of the company, move on to reviewing its financials leading into 2020, and then look at how it has performed in 2020. I will end the section by looking at information disclosed in the recent prospectus filing that provides insights into the company’s journey to its initial public offering.

Timeline of Airbnb

Airbnb’s roots go back to 2007, when during an industrial design conference in San Francisco, Brian Chesky and Joe Gebbia realized that there were opportunities for homeowners to rent their homes to visitors, and created a company called AirBed & Breakfast. Joined in 2008, by Nathan Blecharczyk, a Harvard graduate and technical architect, (Read more…)