Last month, The Wall Street Journal reported that Airbnb will pay its new investors, Silver Lake and Sixth Street, more than 10 percent interest on $1B in debt financing. The debt financing also comes with warrants struck at a valuation of $18 billion. In 2017, Airbnb raised equity financing at a $31 billion valuation.
So what is Airbnb’s implied valuation today? You would be tempted to say $18B, based on the strike price of the warrants. But an alternative analysis tells a different story.
On the secondary shares exchanges, private investors tell us that Airbnb stock hasn’t traded recently but that if it did, those investors would start with bids in the range of $20–23B.
At PrivCo, however, we believe that you should compare Airbnb to the public comps. Take HLT (Hilton), which trades at approximately 3.13x 2019 revenue and 12.8x 2019 adjusted EBITDA. HLT is asset-light and owns 65 properties, manages 703 hotels, and franchises 5,342 hotels per their 2019 10-K so it’s a fair comparison to Airbnb. For 2020, analyst estimates consolidated on Yahoo Finance! (HLT stock price) suggest that HLT’s 2020 revenue will come in at $6.7B and the company will remain profitable, implying a 4.2x 2020 revenue multiple.
For Airbnb, a $20–23B valuation would imply 4.2–4.8x 2019 revenue or 9.1–10.5x 2020 revenue (see PrivCo’s 2020 revenue estimate below), markedly higher than HLT’s revenue multiple. With respect to EBITDA, Airbnb reported 2019 EBITDA of ($276.4M), as confirmed by The Wall Street Journal and PrivCo, so we cannot apply a multiple of negative EBITDA to our valuation picture.
For 2020, moreover, Airbnb is no longer a growth story (i.e., PrivCo estimates $2.2B in 2020 revenue vs. $4.8B revenue in 2019).
Our belief is that even if Airbnb deserves its 2019 revenue multiple or the same historical or future revenue multiples as an established company like HLT, Airbnb’s valuation is more in line with a figure like $10B than $20B. If Airbnb still commands a $20B multiple, it’s because either 1) secondary traders do not have access to the actuals, whether through PrivCo or elsewhere, 2) secondary stock cannot be shorted, or 3) people are willing to pay a premium for cool, tech brand names. But Airbnb has additional issues looming that threaten its long-term viability, including 1) overburdened hosts bought many properties to put on Airbnb and now can’t cover their costs (see WSJ), and 2) increasing regulations, cleanliness, and safety might conspire to make the established industry brands more trusted than Airbnb in the wake of COVID-19.
We’ll stick with our $10B valuation estimate.