Airbnb has filed for a surprise and large IPO. What does it mean for investors?
IPOs aren’t always a great thing for everyone. Few expected many great or large IPOs in 2020 after the COVID-19 pandemic. Still, they can provide a lot of signals for all types of investors. In this case there can be some very interesting takeaways for mortgage note and real estate investors.
The Airbnb IPO
After COVID-19 hit most would have doubted to see an Airbnb IPO this year. The travel and hospitality industry took some of the biggest hit from the crisis. While stocks overall seem to completely ignore reality and push ahead on vapors of hope, this category took a bit hit to their wallets.
Airbnb reported a 70% drop in bookings in May. Followed by another 30% drop in June according to Market Watch. Their revenues tanked and they lost almost 70% of their revenues. They also lost $13B in valuation in just a one month period.
In August 2020 Airbnb announced it had filed for an IPO. Expect it to be a big one.
What An IPO Means
Looking at other Initial Public Offerings (IPOs) in recent history, they often signal a lot of negative things.
It is often the end of the road. It is a move played when it seems like the growth and space has peaked and founders and their investors want to cash out, and have the public buy them out.
All too often going public signals a pending string of terrible decisions for consumers, shareholders and stock prices for the next 12 months. Upwork was and is one of the most notorious for this. Zillow is another.
In this unique case it could be a sign of a new era. Yes, we’ll probably see many of the same corporate mistakes. Yet, there are some big factors working in favor of vacation and short term rentals from private owners, like through Airbnb.
Evictions and foreclosures will push the need for short term rentals without qualifications. Travel restrictions mean soaring demand for in-country and in-state vacations. Think tents, rural retreats, and apartments.
For investors, it can be great if you own them. Providing you didn’t buy at peak prices in big cities, banking on high occupancy rates and peak prices. Mortgage notes on these properties can be good as well, with the potential for performance rising. If you have to take them over it is good cash flow.
Finally, Airbnb is an example that you can make it in tough times. Especially if you streamline your business, push forward, raise money before you need it, and find alternative sources of capital.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund