Does Airbnb’s public offer documents tell use more than they might otherwise wish us to know?
News of Airbnb’s planned December initial public offering (IPO) has been circulating for a couple of days. Apart from generating questions in the minds of those among us struggling to comprehend how a relatively new company, that has never turned a profit, can still command an estimated stock market value of $18 bn (less than half its $38 bn pre-covid-19 valuation!), the news has yet to attract, much if any, immediate attention within the UK travel, hospitality and tourism industries.
Then again, the potential game changing news from early October, that in settling its own tax affairs, Airbnb were handing HMRC the detail of c 225k UK hosts and their income for 2017-18 and 2018-19 tax years has also, oddly, attracted little or no industry comment either. Nor perhaps, has it had the wider public airing it needs, if those hosts who may have inadvertently made errors in their returns are to make full use of the opportunities to correct these, with little or no additional penalty, before the end of January 2021. HMRC are apparently taking a relaxed approach to this, at least until the correction deadline for 2018-19 tax year. Thereafter, hopefully any alleged past and potential, future, illegal tax advantages the previous opaque nature the sharing accommodation platform business models may have given will begin to evaporate as news spreads and HMRC begin to investigate, starting, presumably, with the more obvious or larger anomalies?
Taxation is of course is only one of a number of regulatory and legal areas of concern regarding the sharing accommodation sector. These are all areas of concerns that Airbnb appears to have taken a leading role in contesting and downplaying, while also working closely with Governments and their agencies to resolve, but without necessarily directly addressing the root causes. So where is the compelling evidence that better regulatory and legal compliance represents a risk to the business model and the profitability of sharing accommodation platforms and/or might be one that Airbnb has and is working to avoid? Perhaps surprisingly but on reflection understandably, it is in Airbnb’s own IPO documentation lodged with US Securities and Exchange Commission on Monday 16 November, or at least that is my layman’s reading of its content. I am assuming the IPO needs to be brutally honest, if it is to serve to avoid any miss selling liabilities for previously known or predictable issues?
Rather the reading the news articles on the IPO, of which there are many, I would urge destination managers, regulators, policy makers and those in various levels of government with an interest in tourism, housing and associated safety and other necessary controls, to at least scan, if not read in full the “risk factors” section of the Airbnb IPO (pages 27 to 100). A lot of it is unremarkable but scattered around in odd bullet points or over full paragraphs, especially in the first half, are some necessarily frank assessments of future risk and, by inference, of current and past risk.
This assessment includes much that arises from regulatory compliance on Airbnb itself and, critically, that on professional and individual hosts, who it seems to say might be dissuaded from using the platform if they were compelled to abides by existing, or new laws, regulation or taxation. I may be being naïve but knowing that there may be a substantive compliance problem in your business model and then activity working to avoid addressing it seems, at the very least, to be morally questionably? The sections on page 36 and 43 are particularly interesting but are by no means the only significant paragraphs.
It seems to me that, various parts of the Airbnb own business risk assessment, either taken separately or combined, serve to confirm much of what many in the wider industry have said for years and which Airbnb have worked tirelessly to deny and or avoid doing. These complaints are themselves are even identified as a risk factor. Making sharing platforms safe, legal, and regulatory compliant environments for both hosts and customers isn’t in Airbnb’s own assessment apparently, necessary a good thing for the performance of such platform’s or their business models. Rectifying the problems is also something that, read in the round, the IPO implies that Airbnb have and should apparently continue to try to avoid doing, when and wherever possible.
There are other potential gems in the risk assessment, for example, comment around the validity of their metrics (page 54). This may be the stuff of a standard liability clause in an IPO but certainly isn’t to my knowledge how they have presented the validity of their metrics when using them to make the case for why they should be allowed to do business the way they do and how it is the public and small individual hosts bests interests to allow it to continue doing it in this way. I am sure others will find many more potentially interesting snippets when reading the IPO.
The public listing of Airbnb will almost certainly go ahead and consequentially its new public owners will soon be wrestling with making Airbnb both more profitable and sustaining the arguments in the UK and elsewhere that it is in the customers and the wider industry’s best interests that there is light touch, or better still, a hand free approach to regulatory control of the platforms and the host community. Meanwhile, those of us who doubt the motivation and wisdom behind this position need to continue to question it and raise our concerns with Central Government. The unexpectedly more robust stance recently taken on taxation has, I feel, unlock the door but may not yet have opened it; industry representatives now need to keep push to try and obtain a more uniform appliance of necessary regulation and, thus, a fairer, safer environment for both individual businesses and for all consumers.
The IPO can be accessed at: https://www.sec.gov/Archives/edgar/data/1559720/000119312520294801/d81668ds1.htm#toc81668_2