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Airbnb ‘probably looking to capitalize on reopening trend’: EquityZen

On Monday, Airbnb filed to go public before the end of the year. The home rental startup disclosed revenue fell 18% year-over-year last quarter, and that it turned a profit. EquityZen’s Brianne Lynch joins Yahoo Finance Live to discuss the company’s S-1 filing, and the general state of the IPO market.

Video Transcript

JULIE HYMAN: All right, one thing I do see happening, and we have a little more clarity on now, is the Airbnb initial public offering. The company filing for its IPO, so we got some more details on the numbers. Last quarter, the company earned $219 million in profit on revenue of $1.34 billion. Now, that revenue number was a drop of 19%, but it's an increase from the depths of the pandemic. ABNB is going to be the ticker on the NASDAQ.

Brianne Lynch is joining us now. She is EquityZen Senior Research Analyst. EquityZen's a platform that lets people invest in companies before they come public. So Brianne, before we get into the financials, I do want to ask you what kind of demand you guys are seeing and how hot an offering you think this is going to be?

BRIANNE LYNCH: Great to be here. So Airbnb was really this blockbuster IPO that we were all looking for as we entered 2020. They had signaled last year that they were preparing. Their board of directors is basically a who's who of corporate America. And there are certainly a lot of early shareholders and investors who are looking for liquidity after 12 years of being a private company.

So it's one where we've seen a lot of pent-up demand and one where, obviously, COVID-19 has drastically impacted their business. They saw in Q2 that their revenue dropped 72% year-over-year. But I think the most interesting thing is all the decisions they've made recently to turn things around and be in a position to now be going public.

BRIAN SOZZI: Brianne, we were just talking about Tesla and how it looks to be finally sustainably profitable. If Airbnb wasn't profitable in 2019 on that revenue run rate, how do they ultimately drive sustainable profits in this new world post-pandemic?

BRIANNE LYNCH: It's a good question and one that they explicitly state in their S-1 is something they may not be able to do. So they do state we may not be able to be a long-term profitable company. That said, I think that Q3 is an important turning point for them.

They were able to be profitable amidst this pandemic, and they made a lot of crucial changes to their business to be able to do so. So they cut some of the ancillary businesses that they were running, television shows and other things, that were more, you know, cash drains than really profit centers. They did a huge round of layoffs, reducing their workforce by 25% laying off over 1,900 employees. And it seems like they've gotten a lot tighter in terms of cash management, and hopefully that post-pandemic this may be able to get them in a position to be a profitable company, but that's not something that they're promising anytime soon.

JULIE HYMAN: I mean, obviously, this year has unexpectedly, quite unexpectedly, been a really big year for IPOs. But talk to me about the profitability equation, right, because we have gone through a long period where investors and IPOs didn't seem to care about the profitability issue. But then that-- that seemed to be turning a little bit. Where do we stand with sentiment around profitability right now?

BRIANNE LYNCH: It seems that in this low-rate environment, investors are more open to these growing companies that may not be profitable. We've seen that the IPO market has welcomed a lot of these high-- high-flying tech companies recently, Snowflake, [? Powency ?] are two examples of companies that are doing exceptionally well. I would say Airbnb is probably looking to capitalize on this reopening trade that we're seeing in the market.

We have positive news from both Moderna and Pfizer about their vaccines. We've seen a lot of their public market competitors like Expedia trading near their pre-pandemic numbers. So I think Airbnb may be looking to capitalize on this moment in the market where they're realizing, hey, we don't have the profitability story, in fact, we have $700 million almost in losses through Q3, but we are coming back to where we were pre-pandemic, and this is an opportunity.

MYLES UDLAND: And Brianne, just zooming out to finish up here, is this kind of the end of an era of, like, the consumer unicorn coming public? You know, everyone's excited about, I guess, Stripes eventual IPO, if it happens. But you go through the last kind of 18 months of companies coming public, and I'm struggling to think of what major consumer megacorn, decacorn, or whatever that I'm using or I'm aware of that hasn't yet come to market. I guess Allbirds, but they're not nearly as big as Airbnb.

BRIANNE LYNCH: Yeah, Airbnb, I think, really is the big one that we're looking at this year. And it'll be interesting to see if this paves the way for other companies in 2021. But something that they've really capitalized on is their brand. One of the interesting things we saw in their S-1 is that 91% of visitors to their site come organically.

So they've built this brand where people are coming to them. They don't need to advertise. And they really talk about this community that they've built. They use the word community 166 times in their S-1 to talk about both the guests and hosts that use their platform. And I completely agree, there's really not another story we're seeing that has such a strong brand resonance as Airbnb right now.