NKLA Stock – Breakingviews – Airbnb’s post-IPO showing is a pre-SPAC throwback

WASHINGTON (Reuters Breakingviews) – Airbnb’s first earnings since it went public in December show a solid business that went through its growing pains before opening up its stock to outside investors. At a time when startups are racing to market by merging with special purpose acquisition companies – sometimes before they even have any revenue – that’s in danger of becoming a rarity.

The home-sharing app weathered the pandemic better than others in hospitality. Its fourth-quarter revenue fell 22%, beating rivals and analyst estimates, according to Refinitiv. In contrast, Booking Holdings, which owns Priceline.com and Kayak, saw sales drop by 63% in the fourth quarter. A recovery in travel should benefit Airbnb too. It expects a “significant travel rebound” this year with a majority of people choosing domestic or local destinations that favor hosts over hotels. The stock has nearly tripled from its initial public offering price of $68.

It’s not that $109 billion Airbnb didn’t have a rough 2020, but it did so in private and emerged more focused. Revenue dropped by 80% in six weeks last year. Last spring, it laid off 1,900 employees and raised $2 billion in debt. Expansion plans that included launching a magazine were shelved. As business somewhat recovered, it even made positive earnings in the third quarter of $219 million.

Companies taking advantage of the SPAC craze will be dealing with their challenges in public. Electric-truck startup Nikola sold itself to a blank-check company about a year ago, skirting the rigmarole of a traditional IPO, at a $3.3 billion valuation. It is taking reservations for vehicles but hasn’t actually produced one yet. Revenue in the fourth quarter is expected to hit $17,000, according to Refinitiv. Genetic testing firm 23andMe and lifestyle brand Playboy International are examples of companies trying to shift from a flagging business model to a racier one by merging with SPACs.

Investors are betting on the future for Nikola, 23andMe and many other blank-check targets. But there will be dustups on the way, and their financial results may not show for months or years whether they are winners or losers. Bankers and backers will in many cases have made money either way. Airbnb’s move to clean house before its market debut already looks like a throwback to the pre-SPAC era and that’s not something investors should be thrilled about.