Airbnb board meets to consider raising funds or buying assets

[NEW YORK] Airbnb Inc's board met this week to consider a wide range of options in response to the current economic crisis, which is weighing heavily on the business. The potential moves include acquiring distressed assets, raising more funding from private investors and revising plans for a stock market debut scheduled for this year, people familiar with the deliberations said.

The home-rental startup has been approached by a dozen potential investors, according to the people, all of whom asked not to be identified discussing private information. The investors include venture capitalists, private equity firms and sovereign wealth funds, with potential deals ranging in size from US$100 million to US$1 billion, the people said. None of them has set a price tag for the company, but Airbnb is unlikely to maintain the US$31 billion valuation it enjoyed during the bull market.

At the same time, Airbnb is actively looking at acquiring distressed companies, particularly short-term rental providers, one of the people said. One possible contender is Sonder Inc, a San Francisco-based startup that lists rental units on Airbnb's website. Sonder's bookings are projected to decline 90 per cent as a result of the pandemic, possibly extending to 2021, another person said. However, two people close to Sonder said it hasn't engaged in deal talks. "Sonder is not for sale or being sold," a spokesman for the startup said.

The situation at Airbnb reflects a grave sense of uncertainty and panic felt across the business landscape, which is forcing most companies to reevaluate plans. Airbnb has said it would go public this year, but the coronavirus pandemic has taken a steep toll on the travel industry. Countries are closing borders to curb the spread of infection, and many places are going into lockdown. Booking Holdings Inc and Expedia Group Inc withdrew financial forecasts, citing the worsening impact of the virus, and hotels are seeking federal aid.

Before the crisis, Airbnb had been leaning toward listing its shares directly for trading on the stock market this year without raising additional capital. It's now reevaluating that position and may instead pursue a more traditional initial public offering to raise cash for the business, people familiar with the matter said. Airbnb, which was unprofitable before the outbreak, faces the likelihood of much steeper losses this quarter and next, after offering refunds for all reservations through at least April 14.

Members of the Airbnb board are divided over the best way forward. The company has about US$3 billion of cash and a US$1 billion line of credit, people familiar with the matter said. CNBC earlier reported some details of the approaches from investors.

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"There is no way any company in the tourism industry is going public this year, absolutely no way," said Greg Klassen, a travel industry strategist at consultancy Twenty31 with more than 25 years experience. "You need multiple quarters of profitability and to look like you're in full control with nothing but blue sky ahead to help with valuations -- and none of those things are true today."

Large investors, including some of Airbnb's own backers, have privately expressed concerns that the pandemic will dent the company's results for the duration of the year and perhaps longer. In recent weeks, that uncertainty has been reflected in stock trading among private investors. The offer price for Airbnb shares have fallen to US$105 as of Friday, from US$150 before the pandemic.

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