Airbnb, Inc Is Looking for Outside Investment
CNBC just broke the news that Airbnb, Inc is in "listening mode" for outside investment from some large investment groups.
Call me a cynic, but this smells like an obvious PR piece that a company anticipating a potential liquidity crisis puts out in order to solicit offers without looking desperate. Although Airbnb is a private company and there is no way of seeing their balance sheet, the media is reporting Airbnb has $3 billion in cash on hand with a $1 billion unused line of credit.
One has to naturally think critically about this number. First off, Seeking Alpha reported that Airbnb ended the quarter with more than $2 billion last quarter, before all the March & April cancellations. Furthermore, does the supposed $3 billion in cash include deposits that Airbnb holds from guests until the reservation's checkout date?
Of course Airbnb "is listening" to investors at this time. If these global coronavirus lockdowns go on longer than April 14th, they are going to need the biggest war chest they can get.
Airbnb Is Under Pressure From the Looming Deadline of April 14th
Airbnb has given themselves the self-imposed deadline of April 14th to figure this coronavirus crisis out. Why April 14th? This is the date the current Extrapolating Circumstances policy ends, that allows guests to skirt their agreed upon cancellation policy with hosts. It's conceivable that the coronavirus cancellations will still be in full force during that time. Will Airbnb risk a full-blown host revolt by extending the date or risk ruining their image with their guests, who far out number their hosts?
On top of that Airbnb leadership has dug their hole much deeper with hosts by promising "bold ideas to help hosts," only to turn around and ask the U.S government for bailout loans for their hosts. U.S hosts have taken to social media to criticize the move, saying that Airbnb is trying to pass the buck and evade responsibility. On top of that, Airbnb listings in the U.S only make up about 13% of the listings worldwide, so this move has only served to make the other 87% of their global hosts upset.
Now all of the sudden, as a result of their controversial Coronavirus policy, Airbnb has $10,000,000's of their renters' deposits draining from their bank account by the day and no service fee income coming in.
$4 billion in "cash reserves" may sound like a lot, but not when you extrapolate the coronavirus a few months out and add in a Global Recession, this might not last long. The good news, is that Airbnb has developed such an amazing reputation, that they won't have trouble finding investors, even in this time. Let's face it. They've built the world's biggest hotel and don't own any of the pesky fixed assets that their hosts and hotel competitors have to maintain. They are in the best position here to come out on top in the travel industry when the dust settles. They just need some liquidity to get through it, and hopefully not drag their hosts and property owners into bankruptcy at the same time.
Is This Investment Round Part of the "Bold Ideas" CEO Brian Chesky Has Promised?
10,000's of hosts have taken their anger out on Brian Chesky for promising his bold ideas, only to beg the government to bail their hosts out. Bold ideas don't happen over night. For the scale hosts are asking for, it also takes financing. Let's hope this investment is part of the bold plan to get through this crisis.
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