Airbnb hosts revenue from IPO pop, spreading wealth past buyers

Since beginning as an Airbnb host in 2016, Travis Schurr has change into a mainstay on the location, itemizing greater than 20 homes within the Las Vegas space. He started when one of many properties in his home-flipping firm did not promote, so he turned it right into a short-term rental.

Now, Schurr and his spouse, Janie, are amongst Airbnb hosts creating wealth from an enormous first-day pop within the firm’s IPO. In its public debut this week, Airbnb put aside as much as 3.5 million non-voting shares for hosts, accounting for as a lot as 7% of the entire providing.

Schurr, 45, mentioned he is by no means been capable of purchase into an IPO earlier than and known as the choice a “no-brainer” given what he is aware of about how they sometimes carry out. He gladly purchased 200 shares, the utmost accessible to him, for $68 apiece, anticipating a major pop when buying and selling began on Thursday.

“All the basics are out the window,” Schurr mentioned, citing IPOs like DoorDash, which surged 86% in its debut on Wednesday. “Once you’re allotted shares in an IPO and you may get in, 9 instances out of 10 everyone’s getting in in case you have the cash.”

Schurr’s $13,600 preliminary funding is price $28,942 after Airbnb spiked 113% to shut at $144.71. He had pre-registered to purchase 275 shares, probably the most allowed, however was knowledgeable Wednesday night time that he was solely allotted 200. Different hosts advised CNBC the identical factor occurred to them.

On the shut of buying and selling on Thursday, Airbnb had a market cap of $86.5 billion on a non-diluted foundation, greater than lodge chains Marriott, Hilton and Wyndham Motels mixed. Airbnb raised a minimum of $3.four billion within the IPO, among the many most ever for a U.S. tech firm.

Airbnb did not say what number of hosts participated within the IPO or if it absolutely allotted the three.5 million shares. Assuming 200 shares was the utmost allotment, the corporate may have issued that quantity to as many 17,500 of its greater than four million hosts.

To be eligible, hosts needed to be primarily based within the U.S. and energetic on the platform in 2019 or 2020, accepting a reservation by Nov. 1. Individuals advised CNBC they had been knowledgeable of this system on Nov. 16, and had till Nov. 20 to pre-register. Seniority helped decide who obtained into the providing.

“If demand for this system exceeds capability, we might invite hosts to take part primarily based on tenure, as decided by the yr they first hosted on Airbnb,” the corporate mentioned in its prospectus.

By opening up a bit of the IPO to hosts, Airbnb added a twist to the first-day IPO pop, an occasion that the majority typically advantages massive cash managers who’ve shut relationships to underwriters like Morgan Stanley and Goldman Sachs, the 2 corporations that led Airbnb’s providing.

Airbnb caught to the final IPO playbook, however made some tweaks across the edges. It mimicked a method used earlier this yr by Unity Software program and likewise DoorDash, holding a hybrid public sale that permit executives solicit bids from buyers and select a worth primarily based on the place they landed. It additionally allowed staff with vested shares to promote a portion of their fairness within the IPO fairly than having to attend for the lock-up expiration.

Airbnb is not the primary firm to open its IPO to companion companies. In Uber’s IPO final yr, the corporate put aside as much as 3% of the 180 million shares for drivers. The funding has thus far not paid off very nicely: Uber debuted at $45 in Might 2019, after which traded under the IPO worth till final month. It is now at $54.35, representing a 21% improve from the IPO, whereas the S&P 500 is up 27% over that stretch.

Even with the corporate’s blockbuster IPO, Airbnb hosts have had a tricky yr within the pandemic. Due to the plunge in tourism, Airbnb’s gross reserving quantity tumbled 39% within the first three quarters of 2020 from a yr earlier to $18 billion, and the decline is anticipated to proceed via the yr.

Airbnb did not assist itself with the best way it responded to cancellations. Within the preliminary weeks after Covid-19 hit the U.S., it gave vacationers refunds, leaving hosts at a loss. In March, Airbnb put aside $250 million to compensate property homeowners for missed stays, however by the next month tons of of hosts had been complaining in on-line boards that they hadn’t obtained any compensation and even follow-up communications.

Whereas an IPO allotment to a small proportion of hosts will not make up for a yr of monetary struggles skilled by so many individuals who relied on the location for earnings, Airbnb optimists like Richard Fertig say the IPO displays brighter days forward for the enterprise.

A former hedge fund supervisor, Fertig lives in Jackson Gap, Wyoming, and is now a full-time actual property proprietor, with boutique accommodations in Costa Rica, Palm Seaside, Florida, and Palm Springs, California. He is been itemizing properties on Airbnb for about eight years, and says he has tens of millions of {dollars} in actual property tied to short-term leases.

Like Schurr, Fertig signed as much as buy 275 shares and was finally awarded 200.

“I feel will probably be a very talked-about and profitable IPO,” Fertig mentioned, in an interview on Wednesday, earlier than the providing. “We’ll have a really good preliminary bump however I additionally suppose the enterprise has very sturdy legs going ahead due to the speed of adoption and progress and use.”

Fertig, who teaches YouTube programs about Airbnb and short-term leases, mentioned his enterprise slumped from March via early June, however picked again up in the summertime and hasn’t let up since. Vacationers have flocked to seashore cities and rural getaways for household holidays and to work remotely, enjoying proper into Fertig’s candy spot.

“The world immediately is extra about experiences,” Fertig mentioned, from his Costa Rica lodge. “Expertise trumps luxurious.”

Property homeowners weren’t the one ones who obtained to take part within the IPO. Daniel Chan, a Bay Space magician who recurrently entertains techies, performs exhibits as a part of Airbnb Experiences. He is executed magic for C-level executives on the firm and has been reserving exhibits via Airbnb for about 4 years.

Talking on Thursday, simply earlier than beginning a present on Zoom, Chan, who promotes himself as “the billionaires’ magician,” mentioned he was allotted 200 shares. He, too, initially registered for 275 when the value vary was $44 to $50.

Chan mentioned he obtained nervous when the vary ticked up and mentioned he was disillusioned when it jumped to $68 as a result of he thought it might be a lot tougher to generate good points. He is shocked how unsuitable he was.

Now, the query for Chan is how lengthy to carry. He would not have loads of expertise with inventory investing, although he mentioned he is bought one share of Google each time he is carried out for the corporate, and now owns over $100,000 price of Alphabet inventory.

Through the pandemic, a lot of Chan’s enterprise has come via Airbnb — he mentioned he has 22 digital exhibits lined up this month. Whereas Chan likes the thought of backing the corporate that is supporting his enterprise, he is been round Silicon Valley lengthy sufficient to see some ugly implosions.

“I would promote slowly, however my spouse is saying do not promote in any respect,” mentioned Chan, including that the capital good points tax he faces is a purpose to face pat. “I do not suppose it’ll ever be Pets.com, however you’ve got seen shares go down so it is a actually iffy factor.”

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