AirBnB Pivots to “Virtual Experiences”, Lands $1 Billion Down Round

AirBnB, the tech unicorn that monetizes your spare room has been hit hard by the Coronavirus academic. As the company and the phenomenon grew, more and more “investors” levered up to buy more properties to rent out short term. Some becoming so-called “super-hosts”, running dozens or even hundreds of rental units.

There even emerged a phenomenon, of “STR arbitrage“, which is Short Term Rental Arbitrage: taking out long term leases on properties you don’t own, to rent out short term on AirBnB whilst easily, breezily, pocketing the difference in effortless profits. What could possibly go wrong?

…other than the entire travel industry across the entire planet grinding to a halt overnight, not much. Yet here we are.

To that end, AirBnB, which was gearing up to become one of the year’s most anticipated IPOs has hastily raised another $1 billion combination debt and equity round to shore up business until all this blows over.

Further, the company had previously suspended owner “Immersive Experiences”, which I guess were tours or events put on by local hosts for guests, and have converted them into online virtual experiences… including meditations with sheep and virtual penguins.

The details of the raise look onerous:

  • The valuation was $18 billion, down from their previous valuation of $31 billion in their previous funding round in 2017.
  • The equity portion comes with convertible warrants (further diluting existing shareholders)
  • The debt portion is at a staggering LIBOR + 10%, putting their interest payments north of $100 million / year

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