Los Angeles Times - 02.10.2019

C6 WEDNESDAY, OCTOBER 2, 2019 LATIMES.COM/BUSINESS

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way to let employees and in-
vestors cash out. A direct
listing allows companies to
lower the millions of dollars
they typically pay to invest-
ment banks in underwriting
fees, because they don’t is-
sue any new shares and
don’t raise any new capital.
Instead, they let the market
choose the price. Slack
Technologies Inc. and Spo-
tify Technology have taken
the direct listing route.
An IPO would also force
Airbnb to open its books to
investors. WeWork parent
We Co., which was supposed
to have an IPO this fall, had
to withdraw its plans after
some investors took a look
and were highly critical.
Amid the ensuing scrutiny,
the CEO resigned, and fi-
nancial advisors said We-
Work’s potential valuation
probably would be only
about a quarter of its earlier
$47 billion.
On Tuesday, hundreds of
venture capitalists and exe-
cutives from private compa-
nies met in Silicon Valley to
discuss the benefits of direct
listings. The event was spon-
sored by 12 venture capital
firms and included Mike
Moritz of Sequoia Capital,
the biggest venture capital
backer of Airbnb, Bench-
mark’s Bill Gurley and Spo-
tify Chief Financial Officer

Barry McCarthy.

With a private valuation

of $31 billion, Airbnb is ex-

pected to be one of the most

high-profile companies to go

public next year.

Airbnb executives have

been talking about an IPO

since at least 2018, and the

extended timeline has

caused tension inside the

company. Last summer, a

handful of former employees

sent a letter to Airbnb’s

founders pleading for a pub-

lic offering so they could sell

their stock options — some

of which start expiring in No-

vember 2020, according to

the New York Times. Earlier

last year, Chief Financial Of-

ficer Laurence Tosi left the

company after butting

heads with Chief Executive

Brian Chesky, in part over

the timing of the IPO.

Last month, Airbnb offi-

cially announced it would go

public in 2020 in a one-sen-

tence news release. The

company didn’t give any ad-

ditional details on the time-

line or whether it intended to

file for an IPO or take the di-

rect listing route. So far this

year, Airbnb’s fellow tech

unicorns that have gone

public have received a chilly

reception. Uber Technolo-

gies Inc. is trading at 30% be-

low its IPO price, Lyft Inc. is

down more than 40% and

Slack is down almost 8%.

Unlike these unprofit-

able companies, Airbnb has

a stronger financial position.

In the last quarter, it pulled

in more than $1 billion in rev-

enue, and the company said

its earnings before interest,

taxes, depreciation and am-

ortization were positive in

both 2017 and 2018.

Uber’s former political

advisor Bradley Tusk says a

direct listing would be more

beneficial for Airbnb, which

is now an 11-year-old com-

pany.

“What we’ve seen with

Uber, Lyft and the other big

ones is that when you’re pri-

vate for so, so long, you don’t

get any honeymoon by the

time you go public,” Tusk

said. “Given the struggles so

many tech companies have

had in the past year and a

half, it’s not shocking they

might want to try something

different.”

As Airbnb prepares for

its entrance into the public

markets, one of its major

hurdles is solving outstand-

ing regulatory issues in

some of its biggest markets,

like Paris and New York City,

where its business model of

short-term home rentals

has been at odds with the

city for a decade. Investors

want Airbnb to resolve its

regulatory battles before go-

ing public since failure to do

so could cast doubt on the

company’s valuation.

David Hsu, a professor at

the University of Pennsylva-

nia’s Wharton School, says

that bypassing the road-

show that goes hand in hand

with a traditional IPO

means Airbnb “wouldn’t

have to retell the story and

expose wounds that are al-

ready there.”

The company could,

however, experience more

price volatility in its stock

because it hasn’t been as

well vetted and wouldn’t

have the support of an un-

derwriter. “The direct listing

is super new, but it may well

be appropriate for Airbnb,”

Hsu said. “They are already

a well-known business mod-

el because lots of people

have stayed in an Airbnb, so

this theoretical danger of

volatility in the price may

not be that significant.”

Dennis Schaal, executive

editor of online travel analy-

sis site Skift, said he would

bet on Airbnb doing a direct

listing. “What’s clear from its

history is that Airbnb execu-

tives like to do things their

own way,” Schaal wrote in a

recent column. “If the com-

pany can avoid the well-

worn and costly initial public

offering route that many of

its peers have slogged

through, and go for a direct

listing instead, then that

would be another jab at

mainstream practices,

make employees happy, and

would fit in nicely with the

Airbnb start-up narrative

and culture.”

Airbnb focuses

on going public

AIRBNB CEO Brian Chesky is trying to avoid the pitfalls encountered in other tech public offerings.

Eric RisbergAssociated Press

[Airbnb, from C1]

The Trump administra-
tion has agreed to a new plan
for boosting renewable fuels
and offsetting waivers ex-
empting oil refineries from
mandates to use them, ac-
cording to three people fa-
miliar with the matter who
asked for anonymity before a
formal announcement.

The tentative agreement,

which follows weeks of nego-

tiations, would allow the

U.S. Environmental Protec-

tion Agency to offset those

waivers in response to criti-

cism from industry advo-

cates and Midwestern politi-

cians that the exemptions

have hurt demand for corn-

based ethanol and soybean-

based biodiesel.

Under the deal, the EPA

would factor recent waivers

into new annual biofuel

quotas, by adjusting the tar-

gets to reflect a three-year

rolling average of exemp-

tions.

White House officials also

rejected a bid by oil industry

allies to prevent spikes in the

prices of biofuel compliance

credits refiners use to prove

they have fulfilled the tar-

gets.

The agreement reflects a

deal pitched by farm-state

senators to the president

last month.

The White House press

office declined to comment

on the matter. In an emailed

statement, the EPA said it

“will continue to consult

with our federal partners on

the best path forward to en-

sure stability.”

“The Trump administra-

tion has overseen year-over-

year increases in domestic

fuel ethanol production, to

the highest level in history,

and the United States ex-

ported a record volume of

ethanol in 2018 for the sec-

ond consecutive year,” the

EPA said. “The president

will always seek to engage

with stakeholders to achieve

wins for the agriculture and

energy sectors.”

The deal could still un-

ravel as administration offi-

cials work to translate broad

commitments into formal

regulations.

Dlouhy, Parker and Jacobs

write for Bloomberg.

Trump officials make a deal on biofuel quotas

By Jennifer A. Dlouhy,
Mario Parker
and Jennifer Jacobs