IMAGE: Yong Hian Lim — 123RF

Money and time

Enrique Dans

Airbnb has just launched a new financing round aimed at attracting $750 million and that will raise the value of the company from $25.5 billion to $30 billion. The company hopes to finance its global expansion and hold on to valuable employees with stock options, while delaying an IPO for as long as possible. The strategy is similar to Uber’s, which has raised $10 billion of the last 18 months with the goal of postponing its IPO for as long as possible.

Uber is the biggest transportation company in the world by a long chalk, and using its Mobility as a Service (MaaS) concept to enter new markets such as package delivery and logistics. Airbnb should be seen as the world’s largest hotel group, way above Hilton (valued at $22.4 billion, and which says it isn’t afraid of Airbnb), Marriott ($16.9 billion), or Starwood ($12.5 billion), all of whose share value is declining. What sense does it make for companies like Uber and Airbnb to avoid a share listing when they could use the money on the capital markets to move up to the next stage of growth?

The delaying tactics are probably based on the need to establish on what terms these companies are developing their activity.

In the case of Uber, apart from its ongoing battles with regulators, and that it looks set to win (considering that the company is flexible and innovative enough to come up with a slightly different model for each country to fulfill the regulations), the main area of doubt is what the impact of self-driving cars will be: the company is already test driving its fleet of Ford Fusions in Pittsburgh thanks to its alliance with Carnegie Mellon, but it is aware that removing drivers from the equation would drastically change its model from meeting supply and demand between drivers and passengers to owning a huge fleet of vehicles.

Rumors about the hypothetical purchase of a vast fleet from Daimler and from Tesla, and a very different Uber in the future that would no longer have to pay drivers but would instead run a complex business subject to fixed costs and maintenance, which would oblige its current investors to look at their numbers again.

In the case of Airbnb, we’re talking about a legal battle still in its early stages: New York and San Francisco are talking about imposing restrictions, to which the company has responded with legal action of its own that, say the experts, it has every chance of winning. But this is probably just a legal contingency that could generate doubts and frighten investors.

Two companies that look set to play a big role in the future are patiently biding their time before going public, benefitting from the interest of investors happy to shower them with money that will bring them magnificent returns when they finally open their doors to other investors through an IPO. It’s all a question of balancing the need for money with the need for time.


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

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Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)