When the media first caught wind of the coronavirus back in January of this year, the travel industry was one of the very first to get hit.
Mainly, people were just worried about traveling internationally, especially to regions within China.
That’s why we didn’t have to cancel some of our most important RagingBull plans this year.
We managed to squeeze in a company conference in Orlando before concerns in the U.S really ramped up.
We booked out a bunch of nice hotel rooms for well over 100 of our employees and were able to spend our time there for the most part stress-free.
Fast forward to today: The circumstances we’re dealing with are totally different.
The simple act of leaving your own house has become a daunting proposition, let alone booking a flight to another state and staying in a hotel.
For that reason, it’s understandable that AirBnB, this year’s hottest and most highly anticipated IPO, is second-guessing its public debut.
In Europe and Asia alone, Airbnb booking dropped by as much as 40%.
Today, I want to share some important news about the company that just surfaced— and that makes its 2020 IPO prospects, sadly, even grimmer.
Airbnb Just Secured a Second Billion-Dollar Loan
Thanks largely to two funds, Sixth Street Partners and Silver Lake, AirBnB will be able to stay afloat through the next leg of this coronavirus crisis.
These two funds who signed Airbnb‘s loan just days ago are returning investors, and Silver Lake was already one of the biggest.
Other investors in the deal are BlackRock Inc., Eaton Vance Corp., Fidelity Investments, and T. Rowe Price Group Inc.
This newest $1 billion five-year loan comes with an interest rate of 9%, whereas Airbnb will pay over 10% on its previous one.
But no matter what the interest rate, it’s clear that Airbnb just wants to survive right now and going public in 2020 is the last thing on its mind.
Airbnb Going Public in 2020 Is Unlikely, But There’s Still Hope
A company’s debt load is always a key factor that I look at when considering the potential in an exciting IPO unicorn.
And it doesn’t take an IPO expert like myself to determine that $2 billion in debt added immediately before the public debut is a red flag.
Of course, this loan AirBnB has taken out doesn’t at all change the company fundamentals. Like all hospitality companies hit badly by the coronavirus, this problem was outside of its control.
What’s more promising though is that the company was holding some cash prior to COVID-19, an indication that it was sea-worthy enough to weather even the roughest of market situations.
It’s been estimated that the company was sitting on $3 billion in cash prior to the crisis.
Brian Chesky, Airbnb’s chief executive officer and co-founder, recently expressed optimism that the company will emerge from the positively from the crisis once the coronavirus is resolved.
“I deeply appreciate the confidence and trust that so many have shown in our company even as every sector in travel is going through the storm of the pandemic. All of the actions we have taken over the last several weeks assure that Airbnb will emerge from the storm of the pandemic even stronger, regardless of how long the storm lasts.”
Chesky’s optimism might not change the fact that the company’s valuation is already down from $31 billion to $18 billion after its first recent deal alone, but strong and positive company leadership and management is always one of the factors I look for before trading an IPO.
In the Meantime, Check Out the Coronavirus-Proof IPOs on My Watchlist
It’s not all gloom and doom in the IPO market right now.
As I said in my last article, some companies are actually being helped by the coronavirus.
- Zoom (ZM) has risen in popularity, thanks to its user-friendly communication software that allow us to conduct business as usual.
- Peleton (PTON) allows many people to exercise at home, while gyms are closed.
- DocuSign (DOCU) lets people sign documents remotely, without haven’t to be present with pen and paper.
- Chewy (CHWY) is like the Amazon of the pet industry and allows people to have pet food delivered to their house without having to visit the pet store.
For more ideas, have a look at the most recent watchlist I put out: