Airbnb's New $1 Billion Investment

Airbnb's New $1 Billion Investment

almost 4 years ago2 mins

Airbnb welcomed a new $1 billion investment this week as private investors helped the accommodation marketplace #stayhome and #stayalive during the coronavirus pandemic 🏨

What does this mean?

Neither Airbnb nor its two new investors gave all the details – like which firm contributed what amount, or the valuation at which they invested – but they did reveal that the investment was a mixture of equity and debt, which will need to be repaid with interest 💵

Like most of the leisure and hospitality industry, Airbnb’s not making much – if any – money right now as would-be holidaymakers shelve their coronavirus-afflicted travel plans 🛬 But unlike a lot of the industry, Airbnb didn’t necessarily need more cash: the company has around $2 billion in the bank, along with a $1 billion overdraft. Some analysts, then, reckon Airbnb might use the fresh cash to buy out smaller rivals – a route the company’s taken in the past.

Why should I care?

Shares of some public companies in the travel and leisure industry had fallen as much as 50% from February’s stock market peak – and if Airbnb had pressed ahead with its long-awaited plan to list its shares alongside them, its valuation would’ve likely suffered a similar fate 📉 Instead, the home-sharing company reportedly lowered its own assessment of what it was worth last week, which may have helped attract opportunity-hungry private equity investors with mountains of idle cash.

Private equity started 2020 with more cash than ever | Bloomberg
Private equity started 2020 with more cash than ever | Bloomberg

Airbnb was reportedly considering a “direct listing”, which differs from a traditional initial public offering (IPO) in that it doesn’t actually raise the company any money from the sale of new shares. If Airbnb had needed to shore up its bank balance by raising money, it would’ve had to plump for an IPO instead, and its early investors would’ve been “locked up” – unable to sell their shares – for some time 🔒

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