Justin (00:00): Guys, the question is Airbnb, IPO, it’s come and gone. Should you buy the shares? Should you hold the shares? Should you sell the shares? In this quick video, I’m going to chat about my strategy for IPOs quickly and specifically give my thoughts on the Airbnb IPO. If you don’t already know, Airbnb had its IPO go live last week, Initial Public Offering anticipated around a 50 dollar per share price, and opening trade started at 54 dollars. On the opening trading day, we went all the way up to 150 dollars, which is pretty amazing if you consider the kind of year that we’ve had. The coronavirus pandemic has obviously changed travel forever, and Airbnb has certainly not escaped the difficulties. The changes brought about from coronavirus, in fact, so much so that they had to lay off 25% of their workforce during the coronavirus pandemic in the early days. Certainly, I think a lot of the shareholders are feeling that the IPO was probably a Godsend in that it added some much-needed cash flow and injected some capital into the company. Which hopefully will allow them to hire some of the workforce again and plan for the future and concentrate on growing the business.
(01:29): With that said, I want to quickly talk about my personal strategy when it comes to IPOs. For the most part, I, generally speaking, do not invest in IPOs. Now, I know this goes against a lot of the advice and strategy out there. Of course, there’s a lot of gains to be made, especially in those early days. Still, I’ve just felt over the past couple of years, especially with tech-driven businesses, there have often been inflated values attached to these companies. If you go and look at the company’s fundamentals and you go and look at the actual share price and how the market reacts on the day, it is often a very illogical reaction from the market. I think we’ve seen the same thing with Airbnb, to basically go from an opening trade price of around 54 dollars per share all the way up to 150 dollars on opening day just proves a massive, massive manipulation in the market place in terms of the actual value of the company. Now, I’m not saying that Airbnb themselves have overvalued themselves. I really believe this is very much market sentiment driven. This is generally what happens with IPOs. So what I tend to do generally, usually wait a couple of days, I let the IPOs run its course, and then I start looking at whether there are fundamentals that make sense in order for me to invest in the company.
(02:48): With that said, let’s quickly chat about Airbnb. Airbnb formed in 2008. We know that they have got around 12 million active listings, and we also know that this is a company that is at the forefront of innovation. They’ve really challenged traditional business models in the BnB space, within the accommodation booking space, and even non-traditional entities like booking.com have faced some real, tangible challenges from Airbnb. I love the outlook and the very down to Earth approach that the CEO and his staff have, and one of the things that I think sets them apart from many other platforms is that they really are future-proofing their business. In one of the recent interviews, I heard them saying that basically, they understand that the business travel sector is going to be shrinking, more people are going to be telecommuting, more people are going to be engaging in meetings online, and it doesn’t make sense for people to get on a plane to go and have a one-hour meeting anymore. They believe that leisure travel is the future. Obviously, they're doing very specific things to be corona compliant and take all the necessary precautions and future-proofing their business for how the travel landscape is going to change. I love their outlook. I personally have used their product for about 10 years. I’ve been travelling around the world for the last 10 years, booking 90% of my accommodation on Airbnb. Previously I was using booking.com and, for the most part, started to gravitate towards Airbnb, not just because they had better deals, but I felt there was a far superior platform. The user interface, the way you can access past reviews, access Superhost, everything about the product absolutely made sense to me. I do believe Airbnb has a long term prospect in the market. However, I believe that early investing in any IPO, especially tech-driven, is very much a speculative investment. I have put some speculation money down on Airbnb. Having said that, I’m going to sit on the fence for the next couple of months and just have a look at their actual business strategy, if it adapts, if it changes going forward, have a look at the fundamentals within the business, and slowly over the course of the next year or two. I’ll start making a decision whether or not to move a significant amount of money into Airbnb. Having said that, I do believe that the price of Airbnb is trading at a way, way inflated value to what the real value of the company is right now, and I think that is pretty much standard across the board when you take a look at any IPO.
(05:38): So, we jump in here and have a look at the stats quickly. We can see its trading a market cap of 82.6 billion. We can see that it has a revenue reported of 3.63 billion. Obviously, earnings per share currently, I wouldn't even be looking at those stats because earnings per share stuff are something you want to start looking at as the months lead on and the years lead on. That will really start giving you an accurate indication of what shareholders are getting out of the company. If we have a look at the opening share price here on the 7th of the month, you can see we came in here at roughly about 50 dollars. If you have a look at the next day, the trading value was sitting at 144.87 at its peak. 144.87, I mean, that’s absolutely astronomical that the share went from 50 odd bucks all the way up to nearly 150 bucks. As we can see today, the share price has dropped quite considerably in percentages. We’re about 8.7% down in the current market that’s open, 127.89 dollars it’s trading at. I probably think the share price is going to come down a little bit more. I think reality needs to set in. I think the first initial rush to the share, to purchase in that scarcity mindset, has driven the market, and also, I think people are desperate for a place to put their money at the moment. People are desperate for growth. Traditional vehicles of earning are really under pressure. I think dividend payouts across most companies are going to be a lot lower in the next quarters coming because of the pandemic. I think that many people are taking their money and sticking it into speculative shares, hoping that it’s going to make up the balance in their portfolio that they’ve missed.
(07:33): I’m of the opinion that Airbnb is still very much a speculative investment. If you do have some extra money and you do decide to go into Airbnb, please don’t use leverage. I think that would be a very, very big mistake. I would advise you only to take a small percentage of your capital and to stick it into Airbnb and really treat this as a speculative investment. The chances are this share could run a lot lower for a lot longer before we start seeing it reach its true potential. Having said that, we’re always buying forward in a share, and essentially what we’re doing here is we are buying the future share price. I believe that Airbnb has a watertight business model, I believe that they are future-proof, and I believe the company’s leadership has the right direction, so I am going to speculate on Airbnb. I’m going to watch the share. I’m going to watch it closely. Over time, I absolutely think that this is going to be one of the companies, just like Google, just like Facebook, just like Microsoft, just like Apple, that is absolutely worth having in your share portfolio.
(08:40): I hope you guys enjoyed this video. Let me know your thoughts in the comments below. Are you buying Airbnb? Did you buy Airbnb? Are you holding onto your shares? Are you speculating? Are you taking the long term view as I did? Let me know. I’d be interested to hear from you guys. Also, if you did enjoy this video, please smash that like button. Give us a vote of confidence. The more votes we get, the more content we can create here for you on YouTube. Please consider subscribing to our channel by clicking on subscribe, and then click the bell notification to turn on all notifications for our channel.