Airbnb’s IPO roadshow is looking more and more like a staycation.
After filing confidential plans to go public last month, the short-term rental company will be looking to drum up investor support virtually, joining several other high-profile startups that have embraced e-roadshows and remote IPOs during the pandemic.
“No one is getting in a room together,” said Jocelyn Arel, a partner at the law firm Goodwin Procter, reflecting on the shift to virtual roadshows in late April. “If you are going to move forward in the capital markets, you have to embrace tech and just dive in.”
Roadshows have traditionally been a way for companies to promote themselves to investors and gain commitments from them to buy shares at a certain price.
Pre-Covid, bankers would arrange up to two weeks of meetings with portfolio managers in money meccas like New York and London. Plane-hopping executives would squeeze in as many meals and meetings as possible during that time to go over the company’s story and its financials. Redfin CEO Glenn Kelman once called the process “choreographed pandemonium.”
“I found myself poked and prodded like Kate McKinnon in a Saturday Night Live skit,” Kelman wrote in a 2018 blog post. “And what I learned is that seeking approval from one person after another will tear your heart out.”
In mid-March, with most of the country under lockdown, the roadshow was out of commission. But in April, IPO activity picked up, with nine companies opting to go public that month, followed by 15 in May and 37 in June. July saw a flurry of real estate IPOs, including Lemonade, an insurance tech startup, which raised $319 million, and Quicken Loans parent Rocket Companies, which raised $1.8 billion. And Porch.com, a home-services startup, said it would go public at a $523 million valuation through a special purpose acquisitions company (SPAC).
Airbnb declined to comment on its plans. But, under pressure from early employees to go public, the firm, founded by Brian Chesky, Nathan Blecharczyk and Joe Gebbia, is now planning a traditional IPO over a direct listing or SPAC deal, the Wall Street Journal reported last month.
Though in the current environment IPO-bound firms have little choice, many have embraced e-roadshows because they’re cheaper and more efficient. Management teams can cast a wider net for investors, and there are fewer scheduling conflicts. In 2008, Uber executives spoke with 100 investors who gathered at Claridge’s, a five-star hotel in London. In April, Zentalis Pharmaceuticals’ CEO Anthony Sun conducted investor meetings from his kids’ bedroom. ZoomInfo CFO Cameron Hyzer did eight meetings from his family’s farm in Maine.
Virtual roadshows come with a unique set of quirks, however.
“Some of these portfolio managers are, let’s just say, senior citizens,” said Robert Brownell, a Hamburg-based investment banker at Hauck & Aufhauser, who said more than one investor dialed into Zoom with their phone pressed to their ear. “Everyone would get an extreme closeup of someone’s hairy ear.”
Even without the burden of constant travel, the pace of a virtual roadshow is grueling, and Zoom fatigue is common. Management teams often have back-to-back Zoom calls with just five minutes in between for a quick bathroom or coffee break. The blurred line between work and home also means long days that start with calls to investors in Asia and Europe and end with calls to investors on the West Coast of the U.S.
“It becomes a marathon,” said Fabiane Goldstein, a partner at InspIR Group, a Florida-based investor relations consultant.
The biggest obstacle is establishing rapport, since experienced investors place a certain amount of weight on a team’s “trust factor.”
“In the pandemic’s early stages, it was hard for companies — and even harder for investors — to figure out what impact Covid would have on the business,” said Jay Heller, head of capital markets and IPO execution at Nasdaq, who said that lack of guidance hampered investment and IPO activity early on. He’s since overseen several IPOs from his New Jersey kitchen, and said investors’ comfort level has grown.
In general, IPO size and value haven’t been hurt by remote roadshows. U.S. IPOs have raised $70 billion so far this year, topping $62.5 billion for all of 2019, according to Dealogic. The average one-day gain is 23.7 percent, compared to 12.8 percent last year.
But Lemonade’s stock pop — shares rose 150 percent on the first day of trading — prompted at least one critic to suggest that investment bankers underpriced the stock during its roadshow. (Underpricing gives investors an immediate boost, but the company essentially leaves money on the table.) “They are ignoring demand when they price. On purpose,” Benchmark’s Bill Gurley told CNBC. Lemonade CEO Daniel Schreiber punted when asked what feedback he heard during the roadshow. “Short-term fluctuations are really noise, not a signal,” he said during an appearance on the network.
Airbnb offered little detail about the size and price of its IPO in last month’s filing. The company was last valued at $18 billion, down from $31 billion in 2017. But analysts believe it will secure a $30 billion valuation based on the performance of publicly-traded rival Bookings Holdings, parent to Priceline and Kayak, The Information reported last month.
Though Airbnb needs little introduction to retail investors, bankers will scramble to book meetings with the best portfolio managers.
“It’s a bit like the Wolf of Wall Street, when you see people shouting on the phone selling shares,” Brownell said. “It’s a relationship business.”