The San Francisco-based company is expected to go public next year. Uber and Lyft chose the more traditional IPO route this year and saw their values drop. Spotify and Slack, however, opted for the direct listing option.
Some tech companies that are flush with capital and have been around a long time don’t necessarily need the cash injection from an IPO, and don’t want to spend millions to pay to investment banks to provide underwriting. They do, however, want to let investors have a chance to cash out. In those cases, a direct listing is a good choice; in that case, the market decides on the price.
Also, when going the IPO route, investors would get a close-up look at Airbnb’s books. When We Co., the parent of WeWork, opened its books in preparation for an IPO earlier this fall, investors balked and criticized the company’s dealings, and the initiative was ultimately withdrawn. The company’s CEO was forced to resign in the ensuing fallout, as the company would only get about 25 percent of its $47 billion valuation.
As the idea of the direct listing has become more popular, a group of hundreds of VCs and company executives are meeting in Silicon Valley to discuss them. The event itself will include Benchmark’s Bill Gurley, Spotify’s Chief Financial Officer Barry McCarthy and Mike Moritz of Sequoia Capital.
Airbnb, which has a valuation of around $31 billion, will likely be discussed at the meeting. The company announced it would be going public last month with a very short press release. The 11-year-old company made $1 billion in revenue last quarter and has been expanding into other areas, like hotels and boutique room offerings.