AirBnB plans to go public by direct listing

Yet another Silicon Valley favorite is soon heading to Wall Street.

AirBnB is planning to head to Wall Street in 2020 through a direct listing as opposed to a traditional IPO.

Most tech firms have often taken the latter as their preferred method to open themselves to public market.

IPOs are a means for employees and investors in the companies to profit from their shares.

In a direct listing, companies are not required to pay millions in fees to investment banks. This is because they are not issuing new shares and are not raising any new capital. They instead let the market dictate the price.

Precedent for direct listing in Silicon Valley has been set by Slack and Spotify. Slack had its debut earlier this year, while Spotify made its listing in 2018.

By pursuing the direct listing route, AirBnB has avoided the public scrutiny that comes with filing for an IPO. It does not have to open its books and operational details to investors.

Related article: Workplace Collaboration software company Slack is going public

The Company notoriously had its foundation shaken after filing for its IPO. Its valuation plummeted and internal wrangles ensued in full view of the public, which ended in the ousting of former CEO Adam Neumann.

AirBnB is currently valued at USD 31 Billion.

Talk of a public listing has been prevalent at the company. Employees wrote to the founders pleading with them to pursue this route to enable them to sell their stock options, some of which expire in November 2020.

Former Chief Financial Officer, Laurence Tosi left the short term rentals company after disagreeing with CEO Brian Chesky over the timing of the IPO.

According to Bloomberg, AirBnB is in a better financial position than some of the other unprofitable unicorns that have gone public before.

Uber, Lyft and Slack stock value plummeted 30%, 40% and 8% respectively.

This may make potential investors more wary of purchasing internet company stocks in the future.

Only time will tell if AirBnB’s relatively better financials will sustain the company’s value in the public market.