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Airbnb doesn’t want to go public anytime soon. Why would it? The home-sharing company has been able to raise funding from private investors to its heart’s desire. You’ve got to believe that if the startup decides that it needs more money, SoftBank with its $93 billion fund, is happy to help. And Airbnb is profitable, so it doesn’t need more cash to stay afloat.
What about that sweet IPO payout, you say? Even without going public, the company’s three founders and some early employees netted at least $350 million by selling their Airbnb shares privately. What’s not to love?
A lot, if you work at Airbnb. The company’s employees appear to be growing understandably frustrated and increasingly nervous that they’re getting shortchanged. Some employees’ shares could expire if the company doesn’t go public by the end of 2020. So Brian Chesky, the company’s chief executive officer, promised them during an all-hands meeting on Thursday that Airbnb would go public before that happened. Chesky also told employees that the company would be ready, though not necessarily willing, to hold an IPO by June 2019.
Of course, if you’ve been paying attention, it shouldn’t shock you that Airbnb is reluctant to enter the public markets: Airbnb’s ex-Chief Financial Officer Laurence Tosi left in February amid a growing feud with Chesky over whether the company should go public imminently. Tosi was ready to leap; Chesky wasn’t.
Tosi and a contingent of Airbnb employees aren’t the only ones who’d like to see the company IPO sooner rather than later. There are investors who’d happily cash out as well. But they aren’t calling the shots. This is a tautology but it’s worth underlining: In founder-controlled companies, the founders decide when to go public.
That’s increasingly important as more investors let founders cash out before the IPO. In one very recent example, Travis VanderZanden, the founder of the scooter sharing startup Bird, sold millions of dollars of his own shares just over a year into his company’s existence. These kinds of deals mean there’s been far less personal financial pressure for founders to head to the public markets. Uber co-founder Garrett Camp sold shares to TPG at a $3 billion valuation in 2013. And Travis Kalanick sold $1.4 billion worth of Uber shares, 29 percent of his stake, as part of the SoftBank deal this year. It should be no surprise that it basically took a coup to get the company talking about an IPO.
In the case of companies like Uber, it’s hard to feel too bad for the employees who haven’t been able to cash out. Early hires will get their millions eventually. In a bind, they could get a loan based on the value of their shares. And many employees get opportunities to sell their stakes before an IPO. Airbnb is going to start offering employees cash instead of shares if they’re hungry for liquidity.
You have to wonder, if founders and employees are able to get sell while the company is private, and if later stage investors buy out early stage investors, then what makes this so different than a publicly traded stock? Sure, private companies’ shares trade hands far less frequently and, yes, mom-and-pop investors can’t participate. But, retail investors can already get exposure to big private unicorns through mutual funds that long ago dove headfirst into private-market investing. Fidelity just led a $600 million investment in Lyft Inc. that could take off the pressure to IPO tout suite.
We’re living in a world of pseudo IPOs—just without the transparency and security that regulation provides. Companies have escaped quarterly earnings pressure and they have also avoided regulated financial disclosures. Even Uber, which has shared its financials with the press, doesn’t have to make public disclosures about government investigations like it would if it were a public company. In the case of Airbnb, it’s hard not to think that it’s happy to avoid a direct comparison to rival Booking Holdings Inc.
The gargantuan companies that do seem to be racing to the public markets are Chinese technology giants. Food delivery company Meituan Dianping is targeting a $60 billion valuation when it goes public later this year. It lost $2.9 billion last year. Smartphone maker Xiaomi is planning a public offering in Hong Kong, though it’s stumbled on its way.
We’ve reached a new era when communist-bred tech giants are more open to the public markets than their capitalist counterparts.
©2018 Bloomberg L.P.