Connect with us

IPOs / FFOs

Airbnb chief Brian Chesky: ‘We’ll have to just take a step back’

Published

on


When Silicon Valley visionaries are ordained as multibillionaires, it typically happens while surrounded by cheering bankers, investors and colleagues on a Wall Street trading room floor. 

Instead, Brian Chesky’s moment came at home in San Francisco, in the company of his golden retriever Sandy. “She’s just loving the frantic energy,” Mr Chesky said in an interview with the Financial Times.

The Airbnb chief executive and co-founder watched on Thursday as the price of his company’s stock immediately doubled on its initial public offering.

By the end of the day’s trading, his stake in the home-sharing company was worth just over $11bn. Airbnb itself was worth almost $100bn.

Privately, Mr Chesky had long been wary of taking Airbnb public. Fearing the influence that short-term thinking from Wall Street might have on his company, he had at the very least hoped the hype around its prospects could be tempered while Airbnb introduced new products and invested in growth. 

Clearly, that is now out of the window. Investors have given the company a valuation greater than that of the three largest US hotel chains combined.

It piles pressure on a 39-year-old chief executive to meet sky-high expectations at a time when the company has yet to fully recover from the effects of the pandemic on its business.

“I think that a lot of people buying into the stock know that the world is super uncertain,” he said. “Things are going to go up, things are going to go down . . . We don’t know when travel is going to reopen. I think that we tried to do our very best to disclose that.”

He added: “I think we’ll have to just take a step back.”

Mr Chesky grew up in Niskayuna, a small town in upstate New York. His parents — Debbie and Bob — were both social workers.

“I never heard the letters ‘IPO’ when I was growing up,” Mr Chesky said. “An entrepreneur to me was somebody who ran the local pizza shop.”

He met one of his future co-founders, Joe Gebbia, while studying design. By 2007 both had moved to San Francisco, where they met their third co-founder, software engineer Nathan Blecharczyk. 

Together they launched “Airbed and breakfast”, offering up a cheap place to stay — their apartment — for attendees of a design conference. While the first guests were still in the house, they worked on a pitch deck to show to potential investors.

Struggling for cash, the team would land a coveted spot on Y Combinator, the famed Silicon Valley accelerator programme for promising start-ups. Michael Seibel, who today is Y Combinator’s chief executive, pushed the team to apply.

“I think what’s interesting about Brian and the co-founders is that they were initial users of their product, not only as travellers, but as hosts,” Mr Seibel said. “Whenever there was a challenge, they weren’t thinking about it theoretically. They could put themselves back in those shoes and say, ‘What would we have wanted in that situation?’”

Mr Chesky’s instincts have not always served him well, however. He was slow to acknowledge the presence of racial discrimination on the platform amid troubling evidence that it was harder for black people to book rooms due to discriminatory hosts. 

In 2015 the company was derided as tone-deaf when it ran a series of advertisements in San Francisco with “suggestions” over how the city should spend its tax income.

And during the pandemic, some hosts lashed out at the company for forcing them to offer full refunds to guests kept away by the lockdown and travel restrictions. He would later write an apologetic letter and set up a fund to recover a quarter of the hosts’ lost income.

As a public company, that kind of scrutiny will intensify, particularly when it comes to tensions between Airbnb and the cities in which it operates.

Chip Conley, a longtime mentor and strategic adviser, said Mr Chesky had learnt that long-term success required working with regulators rather than against them.

“He wanted over time to not be Uber,” Mr Conley said. “A little bit more gracious and less competitive in terms of the relationship with competitors, as well as regulatory authorities.”

Mr Chesky’s backers say surviving the pandemic, which involved cutting a quarter of his staff, is evidence enough that he can handle the pressures now placed on him by outside investors.

“I don’t think the challenge of being a public market CEO is anywhere close to the challenge of shaping global travel over the next decade,” said Mr Seibel. “That’s Brian’s challenge.”

Coronavirus business update

How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter.

Sign up here



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

IPOs / FFOs

Coinbase files to become first listed major US cryptocurrency exchange

Published

on

By


Coinbase, the largest US-based cryptocurrency exchange, revealed the scale of its business for the first time in paperwork for a long-awaited public listing that comes during a booming market for bitcoin and other digital coins.

Coinbase generated $1.3bn in revenue last year, up from $534m the year prior, enabling the company to turn a profit of $322m in 2020 after losing $30m in 2019, according to a filing with US securities regulators.

The company’s public debut, the first for a large US cryptocurrency exchange, is likely to rank as one of this year’s largest new tech listings and would mark a milestone for backers of the emerging sector. Coinbase is aiming to list in late March, said one person familiar with the company’s thinking.

Public investors have recently bought up shares in new market entrants such as Airbnb and DoorDash, fuelling a surge in public listings that has drawn comparisons to the 2000 dotcom bubble.

Coinbase filed for a direct listing rather than a traditional initial public offering, meaning it will not raise additional capital when it goes public.

Brian Armstrong, chief executive of Coinbase, warned that prospective investors should expect volatility in the company’s financials.

“We may earn a profit when revenues are high, and we may lose money when revenues are low, but our goal is to roughly operate the company at break even, smoothed out over time, for the time being,” Armstrong wrote in a letter attached to the filing.

Almost all of Coinbase’s revenue came from transaction fees last year, it said in the filing, underlining the company’s dependence on cryptocurrency trading fees.

Shares in the company have recently changed hands in private markets at prices that would give it a roughly $100bn valuation, according to people briefed on the trades, up from $8bn less than three years ago.

Coinbase could use those trades, in addition to input from public investors and its financial advisers, to determine its opening price on public markets.

Coinbase quickly grew into a favoured destination for cryptocurrency traders after it emerged from the Y Combinator start-up programme in 2012. It has recently touted services designed for large institutional investors and a series of acquisitions expanding its reach into software products for cryptocurrency developers.

The company said institutional activity made up almost two-thirds of its total trading volume in the fourth quarter, when transaction revenues jumped more than 70 per cent from the previous quarter to $476m. It said it had 2.8m monthly transacting users in 2020, almost tripling from the year prior.

Coinbase said it oversaw about $90bn in total assets stored on the platform, representing more than 11 per cent of the total market for cryptocurrencies at the end of last year. It has also made venture capital investments in more than 100 companies.

As trading volumes exploded this and last year, the cryptocurrency market has attracted increasing scrutiny from lawmakers and regulators, including over concerns about digital coins being used for money laundering.

In its filing, Coinbase noted the “extensive and highly evolving regulatory landscape” was a risk factor, and that its obligations to comply with various regulations would only increase as the exchange continued to expand internationally.

Among the company’s biggest investors, controlling more than 5 per cent of stock each, are Andreessen Horowitz, Paradigm, Ribbit Capital, Tiger Global Management, and Union Square Ventures.

Goldman Sachs, JPMorgan, Allen & Co and Citigroup are advising Coinbase on the direct listing.



Source link

Continue Reading

IPOs / FFOs

US Spac boom lures UK tech companies in blow to London

Published

on

By


Some of Britain’s most promising tech businesses are considering stock market listings in the US, amplifying the pressure on the UK to change listing rules at a time when ministers are keen to show an ambitious strategy for the City after Brexit.

UK tech businesses, including used car site Cazoo and health app Babylon, are discussing potential mergers with US special purpose acquisition companies, according to people familiar with the talks.

Other so-called Spacs, blank-cheque vehicles that hunt for companies to buy and bring public, have also approached Darktrace, these people said, although the cyber security company is more likely to opt for a straight UK listing. The companies declined to comment. 

The flurry of interest, which comes after UK electric vehicle company Arrival listed in the US through this channel last year, highlights the prickly environment in the UK for Spacs, which are proliferating rapidly on the other side of the Atlantic. Bankers and lawyers are lobbying for a swift change in UK rules.

“The appeal of doing a Spac is severely limited in the UK,” said Jason Manketo, capital markets partner at Linklaters. Current regulation makes London “less competitive particularly for tech IPOs and founder-led IPOs compared to the US”.

Bar chart of amount raised ($bn) showing US Spac frenzy overwhelmingly dominates that of the UK

The US Spac craze has become the dominant equity capital markets trend, with more than 173 vehicles raising $55.2bn so far this year, according to Refinitiv data.

Some UK and European companies are fielding a “frenzy” of offers, according to their executives and investors, as US sponsors look to deploy capital before the two-year deadline to complete a merger expires. 

In Europe, mobility start-ups Tier and Voi, best known for their fleets of rented electric scooters, have also been approached. Voi and other European start-ups are fielding “a lot” of interest, said Fredrik Hjelm, chief executive of Sweden-based Voi. While he said it was “too early” for Voi to go public, like many of his peers Hjelm is maintaining an open dialogue with a small number of Spac sponsors “to understand it and take a stance on how, when and if”. 

LVMH founder Bernard Arnault and former UniCredit chief Jean Pierre Mustier earlier this month announced plans for a European Spac listed in Amsterdam to snap up financial companies in the region.

In the UK, though, the key hurdle is a rule requiring a Spac’s shares to be suspended once a target is chosen. Share trading cannot resume until a deal prospectus is published. That means Spac shareholders who dislike the target and want to sell can find themselves locked in. Only one Spac has chosen London since the start of 2020.

Bar chart of amount raised ($bn) showing European sponsors are increasingly listing Spacs abroad

Former EU commissioner Jonathan Hill has been urged to make London more Spac-friendly under his review of UK listing regulations that is due for release before the budget on March 3, according to people familiar with the matter.

Xavier Rolet, former head of the London Stock Exchange Group, this week said the UK should strive to become a centre for Spac activity in the wake of Brexit.

Bankers and lawyers say removing the suspension rule would encourage UK businesses to list at home and place London on the same footing as Amsterdam, which has emerged as Europe’s Spac hub.

“If the Hill review and [the UK regulator] gave their blessing around the stock suspension point, I feel the UK Spac market would open up rapidly,” said Paddy Evans, head of UK equity capital markets at Citigroup. “If I can convince you that the UK market is going to value [the company] in the same way, a UK tech champion would and should list at home,” he added.

Some UK investors are wary of Spacs because of several high-profile historical failures. Nat Rothschild, a member of the eponymous banking family, raised a £700m Spac in 2010 and merged with Indonesian mining company Bumi which was later fined by regulators for breaching listing rules. In 2015, Gloo Networks raised £30m but never made a deal.

But, today, Spac sponsors include some of Silicon Valley’s most prominent founders and investors. “People confuse how Spacs were viewed 18 months ago with how they are today — which is they are pretty viable alternatives,” said one UK tech executive who is weighing several offers. “They have created a ready-made path for people who want to IPO, with ready-made capital.”

UK investors have traditionally been considered more conservative than their US counterparts and less supportive of lucrative “promotes” for sponsors, which typically hand them 20 per cent of the Spac’s equity for $25,000.

Given the reputational baggage attached, many European venture capitalists remain wary of encouraging their companies to pursue a Spac, with one saying it was for “good companies” but not the “best companies”. “It’s a highly efficient structure, but I think it’s still a bit like settling for a .net domain,” he said, rather than a classic .com. 

However, UK sponsors could integrate several rules popular in the US, such as allowing shareholders to vote on the chosen acquisition and to redeem their shares if they dislike the target. Those urging the Hill review for change argue that attracting Spacs will not erode London’s reputation for upholding a gold standard of investor protections.

“They’re being lobbied quite hard,” said a senior banker. “The environment is perfect for Spacs and people can’t wait.”



Source link

Continue Reading

IPOs / FFOs

Dual-class shares: duelling purposes | Financial Times

Published

on

By


The ship looks set to sail on Britain’s aversion to dual-class shares. A government commissioned review, released on Friday, backs the structure, which is popular with tech founders keen to retain control after taking public money.

Lex, among others, has opposed weighted voting rights as poor governance. Advocates point to the bigger picture: spurn dual-class shares and lose out on big initial public offerings. London would not be the first to cave. A similar argument saw Hong Kong capitulate after Alibaba took its record $25bn IPO to New York in 2014. Singapore swiftly followed suit; even Shanghai now hosts companies with dual-class shares on its tech-oriented board.

Ron Kalifa, author of the UK report, lays out the numbers: the US nabbed 39 per cent of the 3,787 IPOs on major exchanges between 2015 and 2020, while the UK took under 5 per cent. US companies with dual-class shares have outperformed peers, but this is as much to do with tech credentials as, say, Mark Zuckerberg’s stranglehold on Facebook votes. Proponents also applaud the poison pill conferred by weighted voting rights. This, they say, would have seen off pesky foreign buyers of British assets such as Arm and Worldpay, coincidentally Kalifa’s own old shop.

If dual-class shares are inevitable, curbs should be too. Sunset clauses, converting founders’ shares to ordinary class over time, are one obvious step already in use. At Slack, for example, shares convert over 10 years to common stock. Another is to exclude certain votes; on executive pay, say, or related party transactions.

One big caveat: dual-class shares will not open the floodgates to new listings. Ask Hong Kong, a market four times as liquid as London. Post-relaxation of the rules, China tech listings continued to flock to the US because valuations are higher. Last year, despite ground-zero Sino-US relations and tightened accountancy rules, Chinese tech companies flocked to the US. The current run of “homecomings” — US-listed companies such as Alibaba securing secondary listings in Hong Kong — is politically driven. More effective, certainly, but not an option for the UK.

Our popular newsletter for premium subscribers Best of Lex is published twice weekly. Please sign up here



Source link

Continue Reading

Trending