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Airbnb Could Be the Biggest IPO of 2017

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Founded in 2008 by Brian Chesky (CEO), Joe Gebbia (CPO), and Nathan Blecharczyk (CTO), Airbnb is an app and website that connects people seeking lodging with renters who have listed their personal houses, apartments, guest rooms, etc., on either platform. Travelers can book accommodations around the world online or from a tablet or mobile phone.

Airbnb is an easy way for people to monetize any extra living space they have. With over 2 million listings worldwide—including 1,400 castles—it operates in over 34,000 cities and 191 countries, with a total guest list of more than 60 million people.

Airbnb as a Lifestyle

Back in 2014, Airbnb announced a huge, company-wide rebranding, indicating a desire to transition from a hotel service to a lifestyle brand. Since its inception, it has been easy to categorize the company as just another hotel option, taking on big industry names like Wyndham , Hyatt (H - Free Report) , Hilton Worldwide (HLT - Free Report) and InterContinental Hotels (IHG - Free Report) .

But its brand upheaval demonstrates how Airbnb has the potential to be something much more. In a blog post, the company stated they want to possess a logo that will be seen on a variety of products, houses, and businesses, to make sure people understand that whoever owns it is a supporter of their ideal—but, more importantly, a supporter of their brand.

Dubbed Bélo, its logo is a symbol of belonging. While it may look like a misshapen paperclip, Bélo is a “symbol for people who want to welcome into their home new experiences, new cultures, and new conversations.” Airbnb has also redesigned its website and app, which are now far cleaner than previous versions, and feature subtle animations and flashier imagery.

The desire of a company to be more than its services is reminiscent of Shake Shack (SHAK - Free Report) , the better-for-you New York City burger joint who went public in 2015. Shake Shack is finding great success by promoting themselves as a lifestyle brand, as well as putting themselves into the “fine casual” dining category.

So, what can Airbnb learn from this burger restaurant? Like Shake Shack did, would Airbnb benefit by staying private longer? Could extra time help the company reinforce reserves, address weaknesses, and plan for the future?

Controversies to Consider

Airbnb may present a legitimate challenge to the hotel industry, but the company is enveloped by controversy and regulatory issues in cities that are none too pleased with residents turning their homes into hotels.

In San Francisco, critics have blamed Airbnb for the growing vacancy rates and the over $3,900 average monthly rent. Average home prices in the city just hit the $1.1 million median mark, and San Francisco’s population has reached an all-time high (according to Paragon Real Estate Group).

Despite the absence of a permit, which, according to law, one must have in order to rent for under 30 days, San Francisco residents are still illegally listing personal homes and apartments for less than the required number of days on Airbnb. And recently, legislation was approved in San Francisco that would require anyone listing available property on Airbnb or other sites to register the property with the city, hindering a person’s ability to casually list a spare room for some extra cash going forward

The company is also embroiled in a long-standing battle with New York City, where they face similar issues as in San Francisco. Recently, the New York State Senate passed a bill that makes online apartment listings for stays shorter than 30 days illegal, which, not surprisingly, thwarts Airbnb in their goal to expand in the area. If Gov. Andrew Cuomo decides to sign the bill into law, some have calculated that it would delete roughly half of current Airbnb listings in New York.

The penalties for breaking the law will likely be harsh, with fines of $1,000 hitting providers of short-term apartment rentals for the first offense and up to $7,500 by the third violation.

IPO Buzz

Since 2014, and regardless of its fight with certain cities, rumors have been swirling of Airbnb’s inevitable initial public offering, even though CEO Chesky said no to an IPO at that time. In an interview with the Wall Street Journal, Chesky said that “we will do it at a time when it benefits the company, when we have a good reason.”

Airbnb’s last valuation clocked in at $25.5 billion, but the company reportedly just raised $850 million in August, putting its total equity funding at about $3.2 billion at a valuation of $30 billion and making it the second most valuable U.S. startup behind Uber. This, as well as being a recognized name in the hotel industry and increasingly popular “sharing economy,” is helping raise buzz. Their popularity among venture capitalists (VCs) is helping increase hype, too.

However, this new round of funding, in addition to a separate deal where investors are planning to buy $200 million in stock from Airbnb employees, could be seen as a move to relieve some of the pressure of filing for an IPO. Airbnb is adding significantly to its amount of available cash, allowing it to spend enough money to continue its global expansion without going public.

But like other tech startups, Airbnb is a company for the digital age, and VCs are clamoring to be the first ones to invest in its expected success. Billions of dollars have been invested in the digital sharing economy over the past few years—specifically, in companies whose platforms are apps and websites that connect a person selling an item or service with a consumer who wants to use that item or service.

According to Neil Sequeira, managing director of VC firm General Catalyst Partners in Palo Alto, California, these types of companies are well-liked among investors. Particularly, Airbnb is popular because it is inexpensive to run; it doesn’t have to build or maintain hotels or hotel staff. The company is also easy to grow quickly, as there is no need for a physical office in every country, just consumers with a smartphone.

“The reason they make better investments is they are very high-margin at scale…you’re basically closing a transaction. You don’t get that dirty,” said Sequeira.

How Might Airbnb Perform?

Like any tech startup, Airbnb’s IPO will be a toss-up. Its tentative valuation of $30 billion is impressive in and of itself, and will most likely be the driving factor for investors come time for a public entrance into the market.

Airbnb needs to keep an eye on their increasing competition. Companies like Roomorama, Homeaway, and the Expedia (EXPE - Free Report) -owned Housetrip all have a dedicated following of their own, and are all beginning to eat into the market share.

Despite rival companies and regulatory issues, Airbnb has the potential to be one of the hottest upcoming IPOs. With billions of dollars in investments already, a thriving rebranding, and its rising popularity among travelers, Airbnb’s IPO is one to watch out for.


Interested in IPOs? Check out the special edition of Zacks Friday Finish Line, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016.

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