In today’s podcast I discuss:
- How to buy AirBnb’s stock after they IPO later today.
- Should you buy it? We all know the stock might do very well, or badly, but what does the evidence suggest?
- Can it be offered to our clients?
If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me or use the WhatsApp function below.
For your convenience, and to give credit to the original writers, I have included links to the articles I referred to and copied them below.
Airbnb is ready to open the doors to public investors Thursday, but the stock may be a bigger risk than traders realize.
Before you add this IPO to your watch list, consider how this company has handled its staff and its balance sheet during the coronavirus pandemic.
Table of Contents
Wednesday, December 9: Airbnb will price shares of its IPO at $68 each, the Wall Street Journal reports.
Monday, December 7: Airbnb updates its filing to state a projected share price of $56 to $60.
Thursday, December 3: Airbnb expects to price its IPO on Dec. 9 and start trading Thursday, Dec. 10, Barron’s and the Wall Street Journal report.
Tuesday, December 1: Airbnb updates its filing to state a projected share price of $44 to $50.
Monday, November 16: Airbnb’s S-1 filing is released to public shareholders, revealing the stock’s ticker symbol: ABNB.
Thursday, November 12: Bloomberg reports that Airbnb may pursue a dual listing on the Nasdaq and the Long-Term Stock Exchange: a new Silicon Valley exchange focused on environmental and social investing.
Tuesday, November 10: Airbnb’s public filing is expected to be delayed until next week. Reports suggest that the decision is related to the ongoing election coverage that could overshadow the filing.
Thursday, November 5: Airbnb is expected to make its SEC filing public next week.
Wednesday, August 19: Airbnb has confidentially filed to go public.
What we know
On August 19, 2020, Airbnb confidentially filed a draft registration statement for an IPO with the U.S. Securities and Exchange Commission (SEC). On November 16, 2020, it released its S-1 filing to the public.
Airbnb intends to go public on the Nasdaq under the ticker symbol ABNB. Helming the deal are Citigroup, Goldman Sachs and Morgan Stanley, among others. Airbnb mentioned in its prospectus that it plans to set aside up to 9.2 million shares of non-voting stock for Airbnb hosts.
The vacation rental platform could raise up to $3 billion from its offering, potentially valuing the company at the $42 billion mark. The projected price per share is $56 to $60, and it’s expected to start trading on Thursday, December 10.
Should you invest in Airbnb?
Perhaps more important than when Airbnb shares will go live is whether backing this vacation rental platform is a practical investment.
In 2019, Airbnb was valued at $35 billion. This year saw that figure sink to $18 billion. In fact, the Wall Street Journal reports that the company had to reach for a $1 billion loan in April 2020 from private investors to make up its shortfall. And in May 2020, Airbnb laid off 25% of its staff — nearly 2,000 employees — in an effort to cut costs and weather the economic downturn.
But the year hasn’t been a total write-off. Airbnb bookings began to rebound in July 2020. Instead of the Q2 67% booking decline from the prior-year period, bookings were down just 28% in Q3 2020. In fact, the company actually turned a profit of $219 million in the third quarter.
That said, Airbnb anticipates another drop in bookings and revenue through Q4 in response to the second wave of the coronavirus pandemic.
Like many travel companies, Airbnb has been heavily affected by COVID-19. And at this point, it’s too early to say what a recovery might look like, or when it could happen.
Do your due diligence
On the flip side, Airbnb’s popularity could help its stock market debut. It’s a household name and even speculation of an IPO launch has gotten heavy media coverage, with Bloomberg, the Wall Street Journal, CNN and countless others covering the announcement. That coverage could help the IPO gain interest.
Pre-pandemic, many investors would have jumped at the opportunity to claim a slice of the Airbnb pie. But its impossible to predict whether the platform’s popularity will be enough to help it overcome doubt cast by recent financial decisions. If you’re considering investing, it’s worth more research into the company’s financials before deciding if it’s worth the risk.
How to buy shares in Airbnb when it goes public
Once Airbnb goes public, you’ll need a brokerage account to invest. Consider opening a brokerage account today so you’re ready as soon as the stock hits the market.
- Compare share trading platforms. If you’re a beginner, look for a platform with low commissions, expert ratings and investment tools to track your portfolio. Narrow down top brands with our comparison table.
- Open and fund your brokerage account. Complete an application with your personal and financial details, like your ID and bank information. Fund your account with a bank transfer, credit card or debit card.
- Search for Airbnb. Find the stock by name or ticker symbol. Research its history to confirm it’s a solid investment against your financial goals.
- Purchase now or later. Buy immediately with a market order or use a limit order to delay your purchase until Airbnb reaches your desired price. To spread out your purchase, look into dollar-cost averaging, which smooths out buying at consistent intervals and amounts.
- Decide on how many to buy. Weigh your budget against a diversified portfolio that can minimize risk through the market’s ups and downs. You may be able to buy a fractional share of Airbnb, depending on your broker.
- Check in on your investment. Congratulations, you own a part of Airbnb. Optimize your portfolio by tracking how your stock — and even the business — performs with an eye on the long term. You may be eligible for dividends and shareholder voting rights on directors and management that can affect your stock.
Airbnb was founded in 2008 and is headquartered in San Francisco, California. Through its online platform, it connects hosts in over 191 countries with travelers seeking local accommodations. Travelers can search for places to stay by numerous filters and metrics, relying on listing details and the feedback of fellow travelers to narrow down their options.
Airbnb is not an accredited business with the Better Business Bureau (BBB), from which it receives an F rating for failing to respond to customer feedback. The company has racked up 2,111 complaints in the last 12 months and its lack of responsiveness has led to a BBB alert being placed on the company. The Better Business Bureau states that Airbnb’s unresponsiveness is due to company layoffs and that outstanding complaints may continue to go unanswered for the foreseeable future.
Airbnb’s poor reputation with the Better Business Bureau is echoed by its disappointing TrustScore of 1.6 out of 5 after 6,213 reviews on Trustpilot. Many negative reviews target Airbnb’s cancellation policy in response to COVID-19, with many guests worldwide failing to receive a refund for canceled trips following government-imposed travel restrictions.
As of August 12, 2020, Airbnb’s official policy on trip refunds states that bookings made after March 14, 2020 are not eligible for the company’s extenuating circumstances policy.
Airbnb has a unique business model, so there aren’t any stocks that serve as a direct comparison. But it falls within the travel sector, which has seen a lot of fluctuation lately.Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn’t include every stock available.
2. Market Watch – ‘There’s always a lot of hype around IPOs’: Read this before buying Airbnb stock
The IPO comes a day after DoorDash finished its debut up more than 80%
Airbnb is becoming a destination for stock market cash as shares in the company begin publicly trading Thursday. But should that make the San Francisco-based home rental company a place to stay for retail investors who want to grow their portfolio?
That tricky proposition may have become even trickier amid a glut of 2020 initial public offeringsthat could make new stock buy-ins seem tantalizingly attractive.
Wednesday marked the first day of trading for DoorDash DASH, +85.79%, which ended its New York Stock Exchange debut with shares up more than 80%. The same day, however, ended with stocks slumping overall and the Dow Jones Industrial Average DJIA, -0.35% dropping 0.5% and the S&P 500 SPX, -0.79% falling 0.9%.
Then there’s the pandemic, which has cut hard into tourism and left open questions about the travel industry in 2021.
An Airbnb spokesman declined to comment ahead of the IPO, but the company’s own IPO materials filed with the Securities and Exchange Commission acknowledge these question marks, noting that “in light of the evolving nature of COVID-19 and the uncertainty it has produced around the world, we do not believe it is possible to predict COVID-19’s cumulative and ultimate impact on our future business, results of operations, and financial condition.”
Still, the company adds, “we believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.”
So does that make an Airbnb ABNB, stock purchase a no-go, or a hot trip? Financial advisers talked to MarketWatch about what average investors need to consider.
The trip may be bumpy
Anyone who wants to buy to Airbnb should be ready for big price swings, just like with other IPOs, said John Bovard, owner of Incline Wealth Advisors in Cincinnati, Ohio. Newly-offered stocks can be volatile and speculative without a trading track record to measure, Bovard said.
He recently lived through the experience after buying shares of Palantir PLTR, -6.86%, the software company which started trading publicly in late September. Following some initial price drops for a stock that opened at $10, shares closed Wednesday at more than $26.60.
“I have experience. It was still nerve-wracking for me,” Borvard said. “The best thing I did was hold onto it.” If the Airbnb shares at some point dip big, “just hang on, just hold onto it,” he said.
Other market experts say it’s easy to fixate on high-profile companies, like Tesla TSLA, -6.99% or Uber UBER, +1.47%, but it’s important to check your own risk tolerance and capacity to stomach price peaks and valleys.
With Uber’s 2019 IPO, it started trading at $42. Within months, it dropped 23%, but then rebounded again — only to drop farther with the March market downturn. The stock is up 80% year-to-date, closing Wednesday just under $54.
Don’t invest just because you think you know the brand
It’s easy to understand how Airbnb works. After all, more than 4 million hosts have accommodated the arrivals of over 825 million guests since the company’s 2008 founding, its IPO documents note.
But experts caution that knowing a company’s service and even using it is different from understanding its investment risks. Familiarity with a brand and emotional ties to that brand aren’t a sound basis for an investment, Monica Dwyer, vice president, wealth advisor at Harvest Financial Advisors in West Chester, Ohio, previously told MarketWatch.
Airbnb has its own hurdles, noted Roshani Pandey, founder of True Root Financial in San Francisco. That includes the possibility of an array of zoning restrictions that will jeopardizing short-term rentals, she said.
To learn about a well-known company from an investing perspective, it’s wise to look at the company’s fundamentals, Erika Safran, the founder and principal of Safran Wealth Advisors in New York, N.Y., previously said.
These are crucial metrics like the price-earnings ratio and company revenue, or technical analysis, like stock price and trade volumes during medium and long-term timeframes.
Treat a possible Airbnb share purchase like other stock purchases, said Treyton DeVore, a financial planner at Piertree Planning, based in Kansas City, Mo.
“Do your research, look at competitors, and understand what you’re investing in with the thought that quarantine and lockdowns won’t last forever,” he said. “There’s always a lot of hype around IPOs. Don’t let FOMO push you into buying a stock just because everybody else is.”
The journey is long
A retail investor who starts buying up Airbnb — or any newly-offered stock — should know from the start they aren’t going to quickly walk away rich. “The biggest winners in IPOs are generally the early investors who invested in the company before the IPO,” DeVore said.
It actually could take some time for a payoff. People who bought up shares of Snap SNAP, -1.70%,the company behind Snapchat, had to wait more than three years “to break even on their IPO purchases,” DeVore said. (The company is now up 200% year-to-date.)
So that’s why a buy and hold position could be the best bet for anyone who wants to own Airbnb stock, observers said.
Bovard says he’s actually bullish on the company, because he thinks the worst is behind it at this point. Nevertheless, investors should only be devoting 10% of their liquid net worth to speculative stocks like Airbnb, said Bovard.
The rest of that money ought to be in diversified index funds and ETFs, he said — “but I do understand people want to invest in something and take a chance at hitting home runs.”
Other advisers say it’s all right putting aside a bit of “play money.” Jared Friedman, a financial planner at Redwood Financial Planning in Scotch Plains, N.J., told MarketWatch he’ll typically green-light clients devoting 5% of their portfolio to the companies that interest them.
With Airbnb, Pandey said “one approach would be to dip your toes in, and buy some stocks at the open and consider buying more over time, rather than all at once.”