US: According to reports by Bloomberg News, Airbnb is discussing using a convertible note in order to help combat future debt issues.
The strategy is a way for companies in need of liquidity to acquire funds without overwhelming their debt capacity.
A convertible note allows investors to convert a debt obligation into equity at any point in time. Many online tech firms, most notably Spotify, have issued them in the run up to their own initial public offerings [IPOs].
Airbnb has been considering a stock listing since last September, with plans to make a listing sometime in 2020.
However, as the world travel market has slowed due to the Covid-19 outbreak, the company’s plans may have been stalled. Bloomberg speculates this may demonstrate Airbnb’s continued appetite for listing after the crisis.
Airbnb currently has $2 billion in cash on hand, with a $1 billion line of credit as well. It intends to use some of its liquidity to acquire many of the short-term rental companies whose bookings are already significantly impacted by the pandemic.
The company itself has committed much of its available funds to fighting the pandemic. Airbnb has committed to full refunds on bookings through April, as well providing $250 million to support its hosts impacted by cancellations.
The company also instituted a hiring freeze and cut back on all marketing expenses to lower financial strain.
Because of these expenditures as well as the current lack of revenue, Airbnb has been fielding investment calls in order to keep money flowing through. Bloomberg estimates the company has been approached by a dozen potential investors, including venture capitalists, wealth funds, and private equity firms.
The size or terms of the note have not been set at the moment, but Airbnb has also been said to be considering discussing its borrowing capacity. The company was valued at over $31 billion before the pandemic, with experts believing this will fall.