How to buy shares in Airbnb (ABNB) when it goes public

Airbnb is ready to open the doors to public investors Thursday, but the stock may be a bigger risk than traders realise. 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.

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 US$3 billion from its offering, potentially valuing the company at the US$42 billion mark. The projected price per share is US$56 to US$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 US$35 billion. This year saw that figure sink to US$18 billion. In fact, the Wall Street Journal reports that the company had to reach for a US$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 US$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 it's 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 with access to the US market to invest. Consider opening a brokerage account today so you're ready as soon as the stock hits the market.

1. 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.
2. 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.
3. 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.
4. 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.
5. Decide on how many to buy. Weigh your budget against a diversified portfolio that can minimise risk through the market's ups and downs. You may be able to buy a fractional share of Airbnb, depending on your broker.
6. Check in on your investment. Congratulations, you own a part of Airbnb. Optimise 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.

What we know about Airbnb's balance sheet

Few companies have been unaffected by the coronavirus pandemic — and Airbnb's financial reports prove that the vacation rental giant is no exception.

With the release of Airbnb's public listing, we got a better look at its financials. For the nine months ended September 30, 2019, Airbnb reported US$3.6 billion in revenue and a net loss of US$322 million. For the nine months ended September 30, 2020, its revenue dropped to US$2.5 billion and it reported a net loss of US$696 million.

These financials show us that in 2020, Airbnb was hit with the same falling revenue and rising losses experienced by many in the travel industry. But prior to the pandemic, the company was growing. From 2018 to 2019, Airbnb saw revenue growth of 32% — from US$3.7 billion to US$4.8 billion. And 2020 hasn't been a complete write-off for the company: Airbnb saw a profit of US$219 million in Q3 2020 as domestic bookings began to rebound.

The bottom line? Investors should review the entirety of Airbnb's financial performance to get an accurate picture of how the company has performed long-term.

Airbnb compared

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.

Check out our short video in which we break down what we know so far about Airbnb's upcoming IPO and how you can buy shares.

Results of similar IPOs

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.

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