Did Airbnb miss the window for its highly anticipated IPO?
The most highly anticipated IPO of 2020 was, supposedly, coming from Airbnb. That was before the market’s fall into bear territory, a European travel ban, and the mass cancellation of sporting events, business conferences, and concerts.
Airbnb has been in no rush to pursue an IPO. In 2018, CEO Brian Chesky touched on his reasons for this in an open letter about “building a 21st century company,” saying that his company would have an “infinite time horizon.” And though it may sound intriguing at first glance, as one reads further the concept descends into huckster hell:
“I know that a lot of companies are thinking about being long-term oriented, but an alternative way of thinking about it is being infinite. Being an infinite company is an idea that my friend, author Simon Sinek, has been discussing with me. Simon explained that a company’s purpose is to advance its vision, and since a vision is a mountaintop you never quite get to, you should have an infinite time horizon. But many companies are designed to be finite. Finite companies are focused on beating their competitors and appeasing short-term interests. But business is not finite. Unlike sports, there is no time clock, so there can be no winning or losing – there is merely surviving and innovating to endure.”
“A company’s purpose is to advance its vision?” Yikes. “Business is not finite?” Some fine bankruptcy lawyers would beg to disagree. Look, business theories can be simple or complex. But the idea of an “infinite time horizon” reads like a cribbing of Matthew McConaughey’s Oscar acceptance speech. It’s a flimsy idea that can be applied to hundreds of successful companies, without saying anything at all. Why is Amazon a juggernaut? “Oh, they look ahead.”
This curious brand of motivational business advice is a feature of American media. An offshoot of Big Idea hucksters like Malcolm Gladwell, Chesky’s friend Sinek is also adept at writing books, giving TED talks, and pushing his ideas out into the world. But should CEOs pick up these arguments and wear them like a cape, allowing the big words and rhetorical flourishes to convince them to jump off a building?
Even before this past week, there was a growing sense that 2020 was not going to be too kind to Airbnb. After recording profits in 2017 and 2018, Airbnb’s costs are outpacing revenue. Stories of scams on the platform are mounting, raising questions about its security. Municipalities concerned about Airbnb’s impact on affordable housing continue to push for stiffer regulation. Employees are anxious to go public.
But now, a global pandemic has upended not only the markets, but crippled the global travel industry. Already, Airbnb bookings are down 40% in China and large European cities due to coronavirus, with a similar fall likely in the US. It’s still likely that they try for an offering sometime after Q3, or maybe go the direct listing route.
But the issue of Chensky’s questionable advisors remains: he shrouded himself in the language of a Big Idea huckster. Is he really the guy to keep leading Airbnb into the 21st century? What good is an “infinite time horizon” if you can’t recognize a favorable marketplace, and seize upon the opportunity? Today that opportunity is an IPO, but tomorrow it might be something even more important to Airbnb and its stakeholders.
Heard on the Street
Liz Hoffman’s “Diary of a Crazy Week in the Markets” is essential reading after a week of information overload. Her fast paced reportage is reminiscent of Andrew Ross Sorkin’s “Too Big to Fail,” and the story has it all: London bankers coming to blows over Earl Grey and traders puking under their desks (stress? ‘rona?), all absent U.S. banking’s de facto leader, Jamie Dimon, as he recovers from last week’s emergency heart surgery.
Speaking of Andrew Ross Sorkin, he’s urging policymakers to have tough conversations about potential bailouts now, before its too late. It’s amazing that bailouts are now considered a standard response to market turmoil. (It also says a lot about NYTime’s strategy for Sorkin’s Dealbook vertical - and how its reliance on chummy conferences and access journalism - have somehow led to WSJ publishing the best recap of this historic week.)
In what may be a sign of things to come, Apple is closing all stores outside of mainland China for two weeks.
Bill Gates is leaving the Microsoft and Berkshire Hathaway’s boards, presumably to focus more of his philanthropic efforts against climate change.
Airlines are waiving change fees and cutting capacity in light of Coronavirus.
$DJIA - Dow Jones Industrial Average
Wow, what a week for the most watched market index, the hallowed Dow. By Friday, all anyone could talk about was coronavirus. But this mess actually started late Sunday night, when a failed OPEC deal led to an oil price war between Saudi Arabia and Russia. The biggest slide in oil prices since 1991 pushed recession indicators to flash their brightest since 2008. And then, Italy shut down.
Bookshelf
Man, living in the richest country on earth ain’t what it used to be.
Highly recommend David Pilling’s “The Growth Delusion,” a fascinating dive into how GDP output fails as an economic measurement.
She Said It Best
"Perhaps the original mistake of the [Direct to Consumer companies] wasn’t in their vision, but in their decision to take the venture capital in the first place."
from Maya Kosoff's "Why All the Warby Parker Clones are Now Imploding"
That’s it for this week. Wash your hands. Keep your sanity while quarantined. Buy lots of snacks.