Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Airbnb could save the IPO market...in 2020

Airbnb could save the IPO market...in 2020

It's not easy being a unicorn. Peloton flopped. Uber has struggled and WeWork put its IPO on ice. Still, there are hopes that Airbnb, the red hot home sharing company, can change the story for unicorns. But it doesn't plan to debut until next year.

Silicon Valley may encourage unicorns to grow for growth's sake. Wall Street is far less forgiving.

The recent flops of Peloton (PTON) and SmileDirectClub (SDC) in their trading debuts, the market struggles for Uber (UBER), Lyft (LYFT) and Slack (WORK) and the shelving of the controversial WeWork initial public offering show that companies need profitable business models and not just sales growth and vague aspirational goals to succeed in the public markets.

Now, market experts are wondering if Airbnb, the red-hot home sharing company that is currently valued at $35 billion, can change the story for unicorns.

The company recently said it plans to begin trading on Wall Street in 2020 - most likely through a direct listing like the ones Slack and Spotify (SPOT) did, as opposed to a traditional sale of stock in an IPO.


Airbnb to the rescue

Airbnb has a lot going for it that could make it a better stock than other unicorns. For one, CEO Brian Chesky is highly respected and hasn't made any headlines for establishing a wacky corporate culture like WeWork, or Uber when Travis Kalanick was in charge.

The company also has a deeper management bench that is ready to handle the rigors of being a public company.

Last November, Airbnb hired Dave Stephenson, who had worked for Amazon (AMZN) for 17 years, as its chief financial officer.
He most recently had been the vice president and CFO of Amazon's Worldwide Consumer Organization, the unit that oversaw all of Amazon's global retail sites as well as separate divisions like Zappos and Whole Foods.

At Airbnb, Stephenson joined another prominent Amazon alumnus - Greg Greeley, who ran the Prime subscription service before becoming Airbnb's president of homes in March 2018

The company recently reported revenue of more than $1 billion for the second quarter, and has reportedly generated positive earnings before interest, taxes, depreciation and amortization (EBITDA).

In theory, that puts Airbnb closer to an actual profit, and the possiblity that it could have a successful offering next year.
That would be a big leap over recent offerings.

"WeWork's planned IPO turned into a highly publicized debacle that suggested public investors may finally be done overpaying for blazing-fast growth," said analysts at Renaissance Capital, a firm that specializes in IPO research and manages two IPO ETFs, in a report.

Even an established company like Endeavor Group, the Hollywood talent agency and owner of the UFC mixed martial arts sports league run by Ari Emanuel, had to shelve its offering after first cutting its size and share price. Endeavor was profitable in 2018, but it lost money in 2016 and 2017 and in the first half of 2019.

Katie Nixon, chief investment officer with Northern Trust Wealth Management, said in a report that the IPO market's recent problems reflect "a renewed and rational lack of exuberance for high valuations in venture capital, and highlights that investors are still paying attention to fundamentals."

"We're not seeing the IPO window closed yet but the market is finicky. There may be more direct listings, but it will take companies with a strong profile like Airbnb to do them," said Michael Lin, director of accounting & transaction services at MorganFranklin Consulting.


Unicorn meltdown but don't count out all IPOs

Investors may be shunning mega-unicorns like Uber and Slack but they have flocked to companies in hot sectors such as cloud security and software.

Lin pointed to Datadog (DDOG) and Cloudflare (NET) as two recent offerings that have held up better than other, more buzzy IPOs, although both stocks were down Tuesday. Investors have continued to flock to plant-based protein maker Beyond Meat (BYND) and web conferencing company Zoom Video (ZM) as well.

John Mullins, an associate professor of management practice in marketing and entrepreneurship at London Business School, said he remains optimistic about Airbnb's chances for success, because of its market-leading position and stronger financial position.

Still, some experts think investors should remain extremely cautious when investing in startups.

"We are seeing a beginning of a correction, a back-to-sanity moment," said Megan Bent, managing partner at venture capital firm Harbinger Ventures. "Vision alone is not enough to overcome weakness on the bottom line - and revenue growth alone can't overcome weak corporate governance."

Bent said her firm has eschewed hot tech unicorns in favor of smaller, private consumer products makers, such as feminine hygiene products maker Cora, subscription wine service Vinebox and organic baby food company Once Upon a Farm, which was co-founded by actress Jennifer Garner.

Dev Kantesaria, founder and portfolio manager of Valley Forge Capital Management, said that he, too, believes investors shouldn't chase high-profile Silicon Valley unicorns when there are plenty of profitable market leaders out there.

"I'm generally not a fan of money-losing IPOs. It's a dangerous place to invest," Kantesaria said. He has bought only two high-profile IPOs during the past few decades: the 2006 debut of MasterCard (MA), and Visa (V), which defied the odds with a successful IPO in the midst of the 2008 bear market.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×