Neil here.
Last week, the long-awaited news dropped that Airbnb is finally planning to file for an initial public offering (IPO) this month.
The startup had planned to go public last year but backed out following flopped IPOs from other big names like Uber (NYSE: UBER) and Peloton (Nasdaq: PTON).
But this year, COVID-19 shook up Airbnb’s long-term plans, as their valuation sharply dropped from $31 billion to $18 billion.
CEO Brian Chesky laid off 25% of his employees to cut costs – a tough but necessary decision. He also predicts that their 2020 revenue will be less than half of what it was last year.
Considering these major hurdles, a successful IPO might just be the solution to get the cash flowing again and ultimately get Airbnb back on its feet.
Here’s what makes Airbnb the perfect case study when it comes to making a decision about a potential IPO.
Their team has the hustle and intuition necessary to make it through just about any market condition possible… They were founded during the Great Recession, after all.
And today, Airbnb’s news is a great opportunity to discuss exactly why some companies choose to go public, while other companies choose to stay private.
Let’s get into it… and exactly how you can take advantage of either scenario.
Why Companies Go Public
Usually, companies choose to go public because they need capital.
Opening up company shares to the public can bring in an influx of cash very quickly, which can help companies pay down their debts and fuel growth, among other things.
An IPO can also be a pot of gold for investors who’ve been a part of the company’s growth since the beginning (or close to it).
Companies that make it this far have generally gone through years of business development to put them in a strong position for an IPO.
In fact, a company should not go public unless they have strong management, established business procedures, solid revenue, and a long-term plan for the future.
Going public can also increase a company’s prestige and reputation on the market. Some of the world’s most powerful behemoths are now publicly traded after starting off as the little guys many years ago. Remember Amazon’s story?
But that’s not to say private companies are any less influential in the corporate landscape.
Which brings me to my next point…
Why Companies Stay Private
For many companies, an IPO is the icing on the cake for years of hard work and company growth.
But that’s not always the case. Being a publicly traded company comes at a price… and many startups don’t want to pay it.
For example, private companies aren’t required to follow the same strict annual reporting and auditing rules as public companies.
They can also raise capital through private funding sources like venture capital, bank financing, and angel investing.
In other words, the business can pick and choose investors who will add value, connections, or other benefits to the company, rather than having to please hundreds or thousands of anonymous shareholders.
A non-IPO does not mean an angel investor can’t make money.
In fact, an IPO is only one of several different options for exiting an investment. Acquisitions, mergers, or even privately selling shares are all potential exit options. Some startups even grow enough to start distributing dividends… meaning an angel may not have to exit to start seeing profit.
———–
If and when Airbnb finally hits the public market this year, I expect it to turn into a feeding frenzy, especially if the vacation and travel industry turns around.
However, it’s still vital that every single investor do their proper due diligence to make sure their investment is well thought out.
And that goes for any investor in any company.
But with such a crowded public market, it’s difficult to know which stocks are worth your while… and which stocks you should ignore completely.
Luckily, my colleague Shah Gilani has the answers you need.
He’s a stock market genius who has put together a comprehensive list of over 50 publicly-traded companies he recommends you consider buying – or selling – today.
If you want to start trading publicly but feel completely lost – Shah’s your guy. I highly recommend you follow his lead (I know I would.).
He’s also giving away three stocks that he believes every single American should own right now, with their ticker symbols and all.
Just click here to get all the details, and I’ll be back soon with another update.
Until next time,
Neil Patel
Last week, the long-awaited news dropped that Airbnb is finally planning to file for an initial public offering (IPO) this month.
The startup had planned to go public last year but backed out following flopped IPOs from other big names like Uber (NYSE: UBER) and Peloton (Nasdaq: PTON).
But this year, COVID-19 shook up Airbnb’s long-term plans, as their valuation sharply dropped from $31 billion to $18 billion.
CEO Brian Chesky laid off 25% of his employees to cut costs – a tough but necessary decision. He also predicts that their 2020 revenue will be less than half of what it was last year.
Considering these major hurdles, a successful IPO might just be the solution to get the cash flowing again and ultimately get Airbnb back on its feet.
Here’s what makes Airbnb the perfect case study when it comes to making a decision about a potential IPO.
Their team has the hustle and intuition necessary to make it through just about any market condition possible… They were founded during the Great Recession, after all.
And today, Airbnb’s news is a great opportunity to discuss exactly why some companies choose to go public, while other companies choose to stay private.
Let’s get into it… and exactly how you can take advantage of either scenario.
Why Companies Go Public
Usually, companies choose to go public because they need capital.
Opening up company shares to the public can bring in an influx of cash very quickly, which can help companies pay down their debts and fuel growth, among other things.
An IPO can also be a pot of gold for investors who’ve been a part of the company’s growth since the beginning (or close to it).
Companies that make it this far have generally gone through years of business development to put them in a strong position for an IPO.
In fact, a company should not go public unless they have strong management, established business procedures, solid revenue, and a long-term plan for the future.
Going public can also increase a company’s prestige and reputation on the market. Some of the world’s most powerful behemoths are now publicly traded after starting off as the little guys many years ago. Remember Amazon’s story?
But that’s not to say private companies are any less influential in the corporate landscape.
Which brings me to my next point…
Why Companies Stay Private
For many companies, an IPO is the icing on the cake for years of hard work and company growth.
But that’s not always the case. Being a publicly traded company comes at a price… and many startups don’t want to pay it.
For example, private companies aren’t required to follow the same strict annual reporting and auditing rules as public companies.
They can also raise capital through private funding sources like venture capital, bank financing, and angel investing.
In other words, the business can pick and choose investors who will add value, connections, or other benefits to the company, rather than having to please hundreds or thousands of anonymous shareholders.
A non-IPO does not mean an angel investor can’t make money.
In fact, an IPO is only one of several different options for exiting an investment. Acquisitions, mergers, or even privately selling shares are all potential exit options. Some startups even grow enough to start distributing dividends… meaning an angel may not have to exit to start seeing profit.
———–
If and when Airbnb finally hits the public market this year, I expect it to turn into a feeding frenzy, especially if the vacation and travel industry turns around.
However, it’s still vital that every single investor do their proper due diligence to make sure their investment is well thought out.
And that goes for any investor in any company.
But with such a crowded public market, it’s difficult to know which stocks are worth your while… and which stocks you should ignore completely.
Luckily, my colleague Shah Gilani has the answers you need.
He’s a stock market genius who has put together a comprehensive list of over 50 publicly-traded companies he recommends you consider buying – or selling – today.
If you want to start trading publicly but feel completely lost – Shah’s your guy. I highly recommend you follow his lead (I know I would.).
He’s also giving away three stocks that he believes every single American should own right now, with their ticker symbols and all.
Just click here to get all the details, and I’ll be back soon with another update.
Until next time,
Neil Patel
Follow @angelsandentrepreneurs
How can u make money if it does not IPO what happens then .Most likely you loose your investment
Hi Joyce,
A company doesn’t have to IPO for investors to see a profit. Companies that don’t IPO can still go through a merger or an acquisition, or they could start distributing dividends if they’ve grown enough. Investors can also privately sell their shares.
Thanks!,
Sarah
Is there an issue with the site. I tried touching the link to “click here to read more” and nothing…..
Hi there,
The page should be fixed now – please try again!
Thanks,
Sarah
How do I find out how the companies I have invested in are doing?
Hi Lisa,
Generally, companies you’ve invested in should give periodic updates to their investors. These updates generally come out once per quarter, but sometimes can come once per year.
If you’re an A&E member, we’ll also send out updates as we receive them from the companies, too.
Thanks!
Sarah