- Airbnb hosts who bought the maximum amount of stock in the "directed share program" saw their investment jump from $13,600 to $28,942 on day one.
- In its prospectus, Airbnb said it was selling up to 3.5 million shares, or 7% of the offering, to hosts, giving preference based on tenure.
- "When you're allocated shares in an IPO and you can get in, nine times out of 10 everybody's getting in if you have the money," said Travis Schurr, a property owner in Las Vegas.
Since starting as an Airbnb host in 2016, Travis Schurr has become a mainstay on the site, listing more than 20 houses in the Las Vegas area. He began when one of the properties in his home-flipping company didn't sell, so he turned it into a short-term rental.
Now, Schurr and his wife, Janie, are among Airbnb hosts making money from a huge first-day pop in the company's IPO. In its public debut this week, Airbnb set aside up to 3.5 million non-voting shares for hosts, accounting for as much as 7% of the total offering.
Schurr, 45, said he's never been able to buy into an IPO before and called the decision a "no-brainer" given what he knows about how they typically perform. He gladly bought 200 shares, the maximum available to him, for $68 apiece, expecting a significant pop when trading started on Thursday.
"All the fundamentals are out the window," Schurr said, citing IPOs like DoorDash, which surged 86% in its debut on Wednesday. "When you're allocated shares in an IPO and you can get in, nine times out of 10 everybody's getting in if you have the money."
Schurr's $13,600 initial investment is worth $28,942 after Airbnb spiked 113% to close at $144.71. He had pre-registered to buy 275 shares, the most allowed, but was informed Wednesday night that he was only allocated 200. Other hosts told CNBC the same thing happened to them.
At the close of trading on Thursday, Airbnb had a market cap of $86.5 billion on a non-diluted basis, more than hotel chains Marriott, Hilton and Wyndham Hotels combined. Airbnb raised at least $3.4 billion in the IPO, among the most ever for a U.S. tech company.
Airbnb didn't say how many hosts participated in the IPO or if it fully allocated the 3.5 million shares. Assuming 200 shares was the maximum allotment, the company could have issued that amount to as many 17,500 of its more than 4 million hosts.
To be eligible, hosts had to be based in the U.S. and active on the platform in 2019 or 2020, accepting a reservation by Nov. 1. Participants told CNBC they were informed of the program on Nov. 16, and had until Nov. 20 to pre-register. Seniority helped determine who got into the offering.
"If demand for the program exceeds capacity, we may invite hosts to participate based on tenure, as determined by the year they first hosted on Airbnb," the company said in its prospectus.
Getting beyond Wall Street
By opening up a piece of the IPO to hosts, Airbnb added a twist to the first-day IPO pop, an event that most often benefits large money managers who have close relationships to underwriters like Morgan Stanley and Goldman Sachs, the two firms that led Airbnb's offering.
Airbnb stuck to the general IPO playbook, but made some tweaks around the edges. It mimicked a strategy used earlier this year by Unity Software and also DoorDash, holding a hybrid auction that let executives solicit bids from investors and choose a price based on where they landed. It also allowed employees with vested shares to sell a portion of their equity in the IPO rather than having to wait for the lock-up expiration.
Airbnb isn't the first company to open its IPO to partner businesses. In Uber's IPO last year, the company set aside up to 3% of the 180 million shares for drivers. The investment has so far not paid off very well: Uber debuted at $45 in May 2019, and then traded below the IPO price until last month. It's now at $54.35, representing a 21% increase from the IPO, while the S&P 500 is up 27% over that stretch.
Even with the company's blockbuster IPO, Airbnb hosts have had a tough year in the pandemic. Because of the plunge in tourism, Airbnb's gross booking volume tumbled 39% in the first three quarters of 2020 from a year earlier to $18 billion, and the decline is expected to continue through the year.
Airbnb didn't help itself with the way it responded to cancellations. In the initial weeks after Covid-19 hit the U.S., it gave travelers refunds, leaving hosts at a loss. In March, Airbnb set aside $250 million to compensate property owners for missed stays, but by the following month hundreds of hosts were complaining in online forums that they hadn't received any compensation or even follow-up communications.
While an IPO allotment to a small percentage of hosts won't make up for a year of financial struggles experienced by so many people who relied on the site for income, Airbnb optimists like Richard Fertig say the IPO reflects brighter days ahead for the business.
A former hedge fund manager, Fertig lives in Jackson Hole, Wyoming, and is now a full-time real estate owner, with boutique hotels in Costa Rica, Palm Beach, Florida, and Palm Springs, California. He's been listing properties on Airbnb for about eight years, and says he has millions of dollars in real estate tied to short-term rentals.
Like Schurr, Fertig signed up to purchase 275 shares and was ultimately awarded 200.
"I think it will be a very popular and successful IPO," Fertig said, in an interview on Wednesday, before the offering. "We'll have a very nice initial bump but I also think the business has very strong legs going forward because of the rate of adoption and growth and use."
'Experience trumps luxury'
Fertig, who teaches YouTube courses about Airbnb and short-term rentals, said his business slumped from March through early June, but picked back up in the summer and hasn't let up since. Travelers have flocked to beach towns and rural getaways for family vacations and to work remotely, playing right into Fertig's sweet spot.
"The world today is more about experiences," Fertig said, from his Costa Rica hotel. "Experience trumps luxury."
Property owners weren't the only ones who got to participate in the IPO. Daniel Chan, a Bay Area magician who regularly entertains techies, performs shows as part of Airbnb Experiences. He's done magic for C-level executives at the company and has been booking shows through Airbnb for about four years.
Speaking on Thursday, just before starting a show on Zoom, Chan, who promotes himself as "the billionaires' magician," said he was allotted 200 shares. He, too, originally registered for 275 when the price range was $44 to $50.
Chan said he got nervous when the range ticked up and said he was disappointed when it jumped to $68 because he thought it would be much harder to generate gains. He's surprised how wrong he was.
Now, the question for Chan is how long to hold. He has limited IPO investing experience, though he said he's purchased stock in companies that hired him, including one share of Google every time he performed for the company. He now owns over $100,000 worth of Alphabet stock.
During the pandemic, much of Chan's business has come through Airbnb — he said he has 22 virtual shows lined up this month. While Chan likes the idea of backing the company that's supporting his business, he's been around Silicon Valley long enough to see some ugly implosions.
"I might sell slowly, but my wife is saying don't sell at all," said Chan, adding that the capital gains tax he faces is a reason to stand pat. "I don't think it will ever be Pets.com, but you've seen stocks go down so it's a really iffy thing."
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