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With IPO Calling, Airbnb Plays Nice With Regulators

Airbnb’s legend began as a desperate idea between friends to make rent when founders Brian Chesky and Joe Gebbia offered space on air mattresses in their tiny apartment to attendees of a design conference. Since that unorthodox day, Airbnb has avoided playing by the rules and following regulations set forth by cities whose focus leans towards taxes and profits made by hotels. Lately, however, the home-rental company has drastically shifted its behavior from fighting regulations to praising them as IPO talks loom. Will it make a difference? And can Airbnb continue to maintain profit levels by playing strictly within the lines?

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Airbnb’s legend began as a desperate idea between friends to make rent when founders Brian Chesky and Joe Gebbia offered space on air mattresses in their tiny apartment to attendees of a design conference. Since that unorthodox day, Airbnb has avoided playing by the rules and following regulations set forth by cities whose focus leans towards taxes and profits made by hotels. Lately, however, the home-rental company has drastically shifted its behavior from fighting regulations to praising them as IPO talks loom. Will it make a difference?  And can Airbnb continue to maintain profit levels by playing strictly within the lines?

Airbnb Tries To Get On The Regulators’ Good Side For Their IPO

Airbnb, while never blatantly breaking laws, has always skated in a gray area of uncertainty. The company has thrived on embracing that uncertainty, and having its guests and hosts champion the Airbnb cause. Now, instead of trying to change regulations to fit Airbnb, founder and CEO Brian Chesky is changing Airbnb to fit regulations. The past week was full of moves by Airbnb which show a shift in Chesky’s priorities. Instead of suing governments, Airbnb is getting on their side and praising new rules and regulations in New Orleans and dropping lawsuits in New York City.

What gives?

The only answer for such a major course correction is that Airbnb has an IPO planned.

But why now? Airbnb, which recently completed its latest $550 million round of funding at a current valuation of $30 billion, isn’t exactly strapped for cash. But launching an IPO allows a company to really step up to the next level. Airbnb has done a spectacular job from day one of overachieving. Yet, by taking the company public, Airbnb will have working capital – not just as a valuation, but as spending money – to expand offices in new territories, hire more (and better) talent, bolster the company’s infrastructure, and acquire smaller companies. All of those reasons can appeal to a company in a big way. But most importantly, Airbnb’s big-name investors may have decided they want to see more return on their dollar, and are suggesting an IPO.  And while Airbnb has pushed against going public for years now, the time looks to be upon us.

In London and Amsterdam (and soon to be other cities), Airbnb is even helping regulators collect taxes on listings and limiting how many nights a host can rent out their domiciles. Why do these regulations matter? Put simply, as a public company Airbnb comes under direct enforcement of public government agencies. While Airbnb the privately funded company could shoot first and ask forgiveness later, Airbnb the publicly traded company must ask permission or suffer the consequences of not only agency enforcements, but also investor sentiment. They’ll have to play nice or see share prices drop. Airbnb is clearly preempting that by getting on the right side of regulators ahead of time.

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One issue to consider is whether Airbnb can maintain its revenue and profits by changing its systems and regulations so drastically. Limiting the number of nights hosts can let out a home relates directly to Airbnb profits. More nights occupied equals more profits for Airbnb. By placing limits on themselves, Airbnb places limits on profits. However, Airbnb continues to innovate and has undoubtedly considered this. When Airbnb launches a public offering, invest heavily, and expect shares to go way up and stay there.

Watch this news with CNET about Airbnb new restrictions , Snapchats IPO filing here:  


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