Airbnb’s Stunning IPO(nytimes.com) |
Airbnb’s Stunning IPO(nytimes.com) |
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...
https://money.howstuffworks.com/ipo7.htm
Instead of letting the underwriter dish out shares to favored institutions, Google held a Dutch auction in which everyone who wanted a share put in a bid. The lowest successful bid became the price that everyone got their shares at, even if they bid a higher amount. This method guarantees that the initial offering price is set to sell all of the shares at a price that conservatively reflects market demand.
Who's the say this wasn't the intended effect - the benefit to the valuation of the 90% of shares still being held is greater than the opportunity cost of the 10% shares sold in the initial IPO?
Related. Look at Snowflake, it's trading well beyond any logic. Most retail doesn't realize that ~10% float is trading. Watch for Monday as lock-ups expire, the price action will be something.
Who cares about the narrative unless you need to raise capital again soon? The money you get in an IPO actually goes into the business, while the trading price of the stock has no impact on the business.
There's an inherent degree of volatility in markets, there's no way to set a price.
You can't compare the actions of "smart money" like Fidelity, etc to a small investor swept up in the speculative mania and buying 50 shares at $140. Those are the ones propping up the prices until the big money deems it safe enough to buy large volumes.
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-lis...
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.
Retail is being blamed. But there aren’t enough retail dollars, nor enough odd-lot trading, to explain these deltas.
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.
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.
From tesla to bitcoin to anything really, it's amazing how wrong the news and social media have been.
Just not too long ago, the news and social media was saying tesla was overpriced and going to crash. Instead it's gained 10X or more in value.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Presumably they would have raised privately at a price roughly equal to what they could have raised in an IPO. So why would that be any better?
So yes, it is rather unlikely that Airbnb will grow enough to justify the market cap. This is tech bubble hype at it's epitome.
The best part about all of this, is that a company called PetCo recently IPO'd as well. https://www.forbes.com/sites/joanverdon/2020/12/04/pets-are-...
So ya, we're probably going to get hurt real bad at some point.
And thank heavens they are. I've been on the suffering end of trying to find a place to rent before but couldn't due to everyone preferring AirBnB for long term rental properties as they could make more money. I won't say it's the root cause of housing crises in cities worldwide, but it's definitely a major contributor, as you have the same number of people now fighting over less area. The quicker AirBnB gets regulated to go back to being a place to rent out a spare room, the better.
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.
That said, I don't have any real insight into the tourism market and won't be shocked if this works out well for Airbnb. I personally try to avoid crowded tourist spots like the plague and this could just be my bias talking.
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.
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.
I don't think individual hotel chains are an equivalent business to Airbnb, since those have high real estate costs and have clear physical hurdles to growth: you have to buy property and build hotels, and staff all of them to run the front desk, carry people's luggage, clean the rooms, do laundry, etc. The comparison to other OTAs like Booking — that don't own the properties but make money from listing them and allowing booking — makes more sense IMO. The valuation looks a lot less frothy with those comparisons.
(I am an ex-Airbnb employee and still hold many shares FWIW.)
I still don’t think it necessarily justifies the current market cap.
It's like saying that Google has a higher market cap than the top five content-based web sites. Sure, but... that kind of misses the point, doesn't it?
A 5% monopoly tax on most rentals/hotels does give you a huge profit eventually.
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.
the investors who bought the IPO allocation got an immediate 100% return but that is not at the expense of the company.
Regardless of whether "you've raised the money you sought".
> the investors who bought the IPO allocation got an immediate 100% return but that is not at the expense of the company.
Could they not have allocated at higher?
Most of the time I get a good experience in an environment that I prefer over a hotel. It is wonderful.
But then there are times like the time we went to NYC, the host was lying about their address to avoid getting in trouble with the city, and expected to contact us on our way to correct that. However we were on an airplane, and when we arrived the host was asleep.
Ever shown up at a stranger's house, past midnight, with 4 kids expecting to go to sleep there? With them having not a clue why you are trying to break into their house?
I have.
I rent: "Whole places", with a strong bias towards detached buildings, that rate 4.7 or higher on their scale, and have glowing reviews that mention how nice the host is. These are almost always $90/night or more, with an average of $120/night.
However I can't get over the service and cleaning fees, especially as they are added on the second page. I don't mind them, but why not include them on the listing page?
Not sure if it's an US thing or if it's something people actually falls for? This is a practice that is prevalent throughout industries, but one standing out of course is restaurants. The menu price: 20USD BUT + SF mandate + service fees + sales tax + mandatory tips, the dish is actually at least 30USD ? Why not just put that on the menu? In Sweden for instance (and most of Europe) the price you see in stores and on menus is the price you pay. Someone starting the next AirBnB and just shows you the actual price on the front page that is on your statement of your credit card in the end, will be very successful (I hope!)
You're right but I think that's an unfair way to put the fact that two rich people can get a remedy from each other without the law, but a rich person only gets remedies from poor people through the law.
The better comparison is Airbnb versus CouchSurfing or TrustedHouseSitters. All three use unused space in your home in exchange for something of psychological and monetary value, including some things Paul Graham said were important to Airbnb - like the psychic pleasure of having guests over.
The difference is that TrustedHouseSitters sitters and CouchSurfing surfers are disproportionately completely broke, so if they go and they break your rich person coffee machine, what are you going to do? Get money from the guest?
You'll never use THS again. Retention is 0% after the first incident. The private equity firm that owns THS isn't going to make you whole, the insurance they give has a $1,000 minimum, the requirements are onerous, etc.
When I break something in an Airbnb, I pay every time. When they fuck up the parking and I get towed, the Airbnb paid. So we both keep using the service.
Michael Sandel talked big talk about Airbnb monetized something that used to be generously gifted, but he omitted the special math of how rich people exchanging stuff with each other results in that thing being utilized 10,000% more, simply because it is sustainable in the sense of people retaining and not hitting the home button, and he never really talked about, ironically, the lack of justice when people break or steal your shit and there is simply no remedy.
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).
From what I’ve heard the tech is mediocre at best there. Doesn’t matter though, the brand is what people pay for and what drives hype.
Only in the US: They've solved one of the hardest problems, not being murdered while using their service....
Uber has had their license revoked and returned repeatedly in London for the last few years because they have such a terrible reputation for consumer safety - instances of girls being assaulted by drivers, and insufficient protection by Uber after that.
Sure, not murder, but still pretty bad.
I've heard a lot of potential hosts not do airbnb for worry of things like guests having massive parties, making drugs, destroying things, etc.
The success of the trust and brand issue is largely due to the number of well meaning hosts far outnumbering the bad and AirBnb keeping the bad stories not get viral too often.
The 'keep your rating high' has been around since eBay and could easily be copied. I wouldn't have a problem using a service that competed with AirBnb. What they have is a volume lead. People look there because that's where the listings are. Hosts list there because that's where people look.
https://www.theatlantic.com/technology/archive/2019/03/what-...
I think they've solved it better than their competitors, but I'm not sure that they've solved it broadly for people using hospitality services.
For better or worse, one bad experience tends to sour people that I've talked to on the overall host-driven places to stay. Whereas for hotels and other more traditional forms, that seems to be compartmentalized to specific locations ("ugh, the hilton in boston") or chains ("I'm avoiding all Marriots from now on").
I think the "not getting murdered" but is more to do with the demographic of people who are "hosts" with the service that they offer (which are mostly whole-homes). It is just at a higher price point that doesn't match the stereotype of "murderous Uber driver". If someone did "something" it's a lot riskier to kill someone in a property that you own vs a moving vehicle. I'm not saying that stereotype is valid in any way, Uber<->Airbnb isn't really a valid comparison there.
That being said, I have 100% heard both stories and concerns about people's privacy being violated in Airbnb's. Hidden cameras, nosey "hosts", etc. That's not even including the trust issues around "I showed up and the host won't let me in and Airbnb is not being helpful, what am I supposed to do now?". Those trust issues definitely still exist.
I also have a hard time understanding why AirBnB is treated as crown jewel of success for using $6 billion in raised capital and more than 6,000 employees to copy what VRBO already did well (and with substantially less resources).
(Honestly, I would like to understand this, if someone can explain it to me).
> I can’t say I’ll be leaving the platform, either. Dealing with Airbnb’s easily exploitable and occasionally crazy-making system is still just a bit cheaper than renting a hotel.
And also dicking around renters when shit does go bad? (Typical example: host says $2000 in damages. AirBnB offers $200. Deliberately frustrate host with weeks/months of back and forth "negotiation". End with an offer of $500, host gives up and take it. Hey hey, $1500 saved!)
Their real value is that when a lot of people think "I'll book somewhere", they now go to Airbnb first, much like when people think "I'll buy something" they go to Amazon first. But I think that's a fairly weak "moat" on the scale of things.
https://toronto.ctvnews.ca/police-identify-three-men-killed-...
Why do they need a moat? What happened to all the free market capitalism everyone believes in? Let the better company win out in true competition?
Or is that just a taking point, and everyone actually believes in building moats to avoid competition?
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.
Those are optional, cleaning fees are not. They should be included in the price shown on the map.
That is correct, my issue is I am looking for places in a certain price point per day, say $200, so in my example I see a place for $200 a day I want 5 days, so $1000 plus a small cleaning fee and other fees(maybe $100 or slightly more). This place after I click on it and prepare to book then totals it up before I reserve, then comes to $1600. It has a $400 cleaning fee and there were also other fees attached. So an unsuspecting person could then get taken by this nonsense.
A possible fix is airbnb could add in all the fees and add that to the daily price, a simple UI fix that would stop this unscrupulous behavior by hosts. So instead of showing as $200 a day it now shows as $320 a day.
The vast majority of AirBnBs are people violating the terms of their leases and/or making undeclared income. A legal AirBnb is just called... A BnB.
Turns out some other guest reported the host for having a hidden camera (which was really the standard Danish fire alarm). The AirBNB messaging made it out to be the host's fault.
-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.
With Netflix I think you need to count the content creators, since first party content is the majority these days.
But yes, we can all agree that these take a lot of people to run
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
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
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.
http://aswathdamodaran.blogspot.com/2020/12/the-sharing-econ...
TLDR;The per share value based upon the latest share count is about $54/share.
For a lot of people, "tourist trap" doesn't register as a thing - those are just the things you _do_ when you go to whatever place you're going to.
If Airbnb becomes the safe, convenient, well-marketed way to discover reputable but not stereotypical local experiences in a marketplace that takes your credit card, they could do well IMO.
AirBNB aren't the first people to try this, but they're pretty well placed brand-wise to sell the 'real local experience curated by ordinary local people' image. And yes, in practice it'll leverage that to sell standard tourist activities and some customers will be delighted, just like they use AirBNB to find ideally situated self-catering holiday apartments run as businesses rather than airbeds in suburban spare rooms
This seems very orthogonal to concerns about being murdered.
> Michael Sandel talked big talk about Airbnb monetized something that used to be generously gifted, but he omitted the special math of how rich people exchanging stuff with each other results in that thing being utilized 10,000% more, simply because it is sustainable in the sense of people retaining and not hitting the home button, and he never really talked about, ironically, the lack of justice when people break or steal your shit and there is simply no remedy.
I'm sorry, I honestly don't really understand. I'm assuming you're discussing Sandel's recent work on what he sees as the moral limits around markets.
You're saying that markets provide a recourse for property damage, which makes them more just? That, again, seems unrelated - no reason you can't have recourse for property damage even if you are letting someone stay in your house free of charge.
I also just think the narrative you're spinning is sort of misleading. Rich people overwhelmingly do have remedies for wrongs and have the capacity to pursue legal action.
Which ones will work and which ones won't is hard to tell, but that is indeed what investors are betting on.
At least Airbnb has a business model that could theoretically make it to profitability. An alarming number of these don't have any coherent path.
Is there any paid service with actual monopoly yet? Amazon has market share, but also competitive prices. To me all of these big markets like taxi, food delivery and online booking seem rather low barrier of entry. And that the customers will be price aware. That can't be really compared with free services like Google, Wikipedia or Youtube...
you’re giving too much credit to investment bankers if you think they would know a travel company that has $2 billion in debt on their balance sheet, losing money, and in the industry most hurt by covid should’ve obviously been set at $100B when that was no where near where the company thought it was valued.
We’re in a market where Tesla is a $600B company selling 500k a year.
Personally, I think the price rise is indicative of some fundamentally concerning market issues that have nothing to do with this company.
The IPO is just one transaction in one point in time. They aren’t losing sleep over this.
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.
It isn’t as if Airbnb can’t sell more shares at $150 now in a secondary offering if they wanted to. The IPO is just one point in time.
The consequence of setting too high and cratering your stock the first day is that employees are taxed based on IPO price. Imagine if you owed taxes at $150 and six months later it was at $70. That would be a nightmare.
And I think you’ve been reading too much Bill Gurley.
Every time you say you don't want to be in a commodity business, you're saying you don't believe in free market capitalism. You don't want competition.
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
https://www.irishtimes.com/business/economy/pandemic-reveals...
>availability in the rental market has bounced, with 41 per cent more properties for rent nationally and 92 per cent more in Dublin.
>In Dublin availability was almost double what it was a year ago, with nearly 3,000 homes on the rental market on August 1st compared to fewer than 1,600 in August 2019,
It's interesting you quote the Irish Times, as Ireland is where I had my trouble.
> In Dublin availability was almost double what it was a year ago, with nearly 3,000 homes on the rental market on August 1st compared to fewer than 1,600 in August 2019,
It literally doubled the market, something much needed. And there's honestly probably still more where the owners didn't hop back into long-term rent. Hopefully it stays like this next year when I plan to go do a masters. And that the government works on fixing it.
In Seattle (last city I stayed at a Hilton) it's $45 after tax. It's entirely possible that not many people making $900 per week go to Seattle, and when they do I bet they don't stay at the Hilton.
Agreed though, it's hard to price in the potentially massive hassle of a bad Airbnb. I think most people treat the probability as zero until it happens to them personally.
They stay here:
https://www.yelp.com/biz/kings-inn-seattle
Browse the photos. It's not bad, the parking is free, and the location is good, but if you can afford better, you should.
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.
This is akin to AirBNB selling dollars for 50 cents.
Losers: Existing Airbnb shareholders who have shares in a company that could have raised $7B in cash but instead raised $3.5B. In theory, the mispricing "cost" Airbnb around 4% of its market cap, so existing common shares are worth 4% less than they should be.
But there's a caveat[1].
Companies like Airbnb (no stable profit) are almost entirely valued on sentiment and expectation. Assuming perfect information and rational actors, in an alternate universe, a direct listing would have resulted in around a $146[2] share price, on top of which the company can raise a secondary listing for $3.5B without affecting the share price. They'd have the same assets and liabilities as they have today, except pocketing the difference (by limiting dilution) instead of handing it to investors.
However, there's no certainty that the valuation would be $146 today had they gone this route. Humans, especially hype-powered retail investors who like to jump on flashy IPOs, are very susceptible to things like IPO bumps when making their buy or sell decisions. An entire field[3] of investing with significant buying power essentially relies on predicting sentiment.
If I'm a common shareholder, sure I'm sad that my shares are worth maybe 4% less than they "should" and that the financial world pocketed the difference, but I'm probably pretty happy my shares are worth what they are and aren't too interested in, for example, rehashing the deal or picking a offering strategy that could have swayed investor sentiment in a way that made my shares worth much more than 4% less.
[1] - The impact of "more perfectly" priced IPOs on market sentiment and thus public valuation is the most significant factor, but a secondary one is the practical aspect that the IPO process consists of a lot of risk, both on the part of the underwriting investment bank who gives the company the money raised in the IPO and the small number of powerful investors get access to (often) preferential pricing from the investment bank in exchange for an advanced commitment to buy the shares and hold for some agreed upon time. This illiquid market is dominated by relatively few actors. An IPOing company who doesn't "play ball" may find itself unable to find someone willing to underwrite their funding round or buy into it at all. [2] - This theoretical loss per share is computable two ways. The easy way is that they "left $3.5B on the table" which divided into Airbnb's current market cap of $84B is ~4%. The other way is the counterfactual way. Airbnb currently has 600M shares outstanding, having issued 50M shares in the IPO in exchange for $3.5B. So if not for the issuance, Airbnb is worth $80.5B with 550M shares outstanding, or $146 per share. [3] - https://en.wikipedia.org/wiki/Technical_analysis
> 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
I don't even know what this means. 90% of people you've met in Miami do "blow"? What? Are you a coke dealer?
Sorry, I really don't see the relevance to the original claim.
Completely agree, that would make the experience more user-friendly for the person looking to rent.
This is an AirBnb platform issue, not necessarily a owner "scam".
Not a trivial engineering problem as the dynamic price based on length of your stay can't be cached easily as base-price-per-night, and I assume caching prices per listing is what makes the map quick to load and responsive, but it'd be a welcome change!
When I search the map shows me a price per night for the amount of nights I picked including the corresponding part of the cleaning and service fees.
So it is not an "engineering problem" but a 100% deliberate "dark pattern" choice on AirBNB's part.
has nothing to do with whether Airbnb was screwed over by wall street.
no one can predict the public market appetite in this environment. Airbnb was arguably richly valued at $50B as is and is richly valued at $100B. Setting your price too high and then crashing your stock is worse for the company due to tax implications and overall investor sentiment.
Raising double the money is a bad thing due to "investor sentiment"? What tangible negative impact does that have on Airbnb. You're gonna need to explain this one. Because it really sounds to me like repeating a talking point told by a counterparty.
you decide on how much you need and then decide the number of shares you sell at what price. it isn’t like they would’ve raised twice the money if they upped the share price.
I'm not saying that they were screwed over.
> all he said was it makes the stock market look bad when some people double their money in a day.
That is one part of what he says, very misleading. He describes it as an "error" that is due to a flaw in the "way Wall Street is organized" (ie. around capitalizing on IPOs). That's more than just saying the markets "look bad".
Just because you’re Goldman does not mean you can predict where a share price will go on day 1. we are in a massive speculative cycle that isn’t just impacting Airbnb’s IPO but a lot of tech stocks, many up 1x-10x in a year.
So to try to argue that wall street purposefully set the price too low when $50B is already high given travel hasn’t fully recovered yet is makes no sense.
People are generally decent.
This represent so many people.
An individual company is not part of an iterative game but the underwriters and institutional investors are, and it creates misaligned incentives.
It’s the reason for the hype around direct listings. So far no one has raised money that way but it’s only a matter of time. The difference is between floating publicly and floating publicly with a raise is basically nothing.
The EMH doesn't apply if there wasn't a previous market price. This was an absolutely massive move, and I'm supposed to believe there was no indication of that ahead of time.
You can definitely model supply and demand if you're Goldman - I'm not saying that you can predict market moves, but this wasn't a move from a previous efficient market-determined price.
> $50B is already high given travel hasn’t fully recovered yet is makes no sense.
$50B is not high by definition given the current market pricing.
Airbnb could take advantage of their stock price and issue more shares in a secondary offering tomorrow if they wanted to and “screw” the investors who doubled their money in a day by diluting them. It’s not like this was their one shot of raising money ever again.
There’s really nothing for Airbnb to be mad about.
I have rented a "non-Whole place" and I would say that was a pretty bad experience. Our room was supposed to be the only Airbnb, but two nights in, they rented out a room with a frosted glass separator next to us as "420 friendly" and the couple that moved in proceeded to have quite loud sex. We gave them pretty scathing reviews, which I am not wont to do.
At 2am, they got mad at us for making so much noise. THEN at 6am, they start blasting some ethnic music as they proceeded to fry food for hours and party. Turns out they were VERY Jewish and were celebrating the Sabbath being over. Surreal.
Getting home at 2am happens, if you don’t like it don’t rent rooms for money. In my head I edited out the expletives from that sentence :-|
I likely would have been kinder if it weren't advertised as "whole condominium".
Having said that places usually are over £90 per night but this is very place dependant.
At this point I'd mostly choose hotels over AirBnB because generally a hotel will try to fix an issue but AirBnb never will. Their position is effectively "sucks to be you, you shouldn't have chosen that listing".
They policy is basically "unless it's life threatening shutup!" and the worst part is either you suck it up or you're out a day of your vacation travel etc as you try to scramble to find another place. It's not fun.
AirBNB is often more expensive, is a hassle with getting a key some times (other side of the city wtf), NO support in case electricity fails, some had dirty laundry. etc etc.
You keep throwing out assumptions without anything backing them.
They at a price and amount for sale. Absent an auction set price it's almost certain that price is inefficiently set. And you're arguing that it was efficiently set when we have tens of billions of proof it wasn't efficiently set via yesterday's stock move.
https://www.stitcher.com/show/invest-like-the-best/episode/b...
Say, I join a public company. If they say they will pay me 500k USD worth of stocks, it generally means that I get 500k/(average share price of month, share price on stock offer date etc.) stocks subject to vesting cycle. Basically, I have fixed number of shares from that point and they appreciate or depreciate with the market.
I am assuming if AirBnB offered 500k USD of RSUs similarly and the RSU price was say 50. That means the person had 10k RSUs subject to vesting cycle. So, if the stock price is 120 now they have 1200k USD worth of stocks subject to vesting cycle.