With a valuation over $30 billion, the Airbnb IPO could be the biggest public offering of 2017. And it could also be the most hyped IPO of the year.
After the March 2 Snap Inc. (NYSE: SNAP) IPO, anxious investors are waiting for the next big private company to go public. Retail investors assume they can make double-digit and triple-digit returns by buying into an IPO early.
But we don't want Money Morning readers to buy Airbnb stock on hype alone.
That's why in this exclusive Airbnb IPO and stock guide, we've provided readers with everything they need to know about the hotel industry disruptor.
And at the end of this guide, you'll know exactly how to profit from the Airbnb IPO date.
Here's everything you need to know before Airbnb stock starts trading...
The idea for Airbnb reportedly came about in 2007 when roommates Brian Chesky (current CEO) and Joe Gebbia (current CPO) could not afford their rent.
The duo came up with a creative solution: Put an air mattress in their living room and run a bed and breakfast. In February 2008, Chesky, Gebbia, and Nathan Blecharczyk (current CTO) called the new venture AirBed & Breakfast.
The trio created the website Airbedandbreakfast.com in the summer of 2008.
In 2009, the company name was changed to Airbnb.com.
Airbnb makes money from service fees for bookings. Each time a reservation is confirmed, guests will pay a service fee of 6% to 12%.
These fees can be higher or lower based on the specifics of the reservation.
Hosts are also charged a service fee to cover the cost of processing transactions. The service fee for hosts is calculated from the reservation subtotal.
Depending on international and local laws, some users will also be charged a value-added tax (VAT). According to Investopedia, guests traveling in the European Union, Switzerland, Norway, South Africa, and Iceland will be charged a VAT.
Because of Airbnb's unique approach, its revenue was projected to have increased 113% from 2014 to 2015.
As of August 2016, Airbnb was valued at $30 billion.
However, CNBC reported on March 9 that Airbnb closed a round of funding worth more than $1 billion.
With the latest round of funding, Airbnb is now worth $31 billion.
In comparison, Snap Inc. (NYSE: SNAP), potentially the most hyped IPO of 2017 thus far, was valued at $24 billion when it priced its shares at $17.
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In terms of U.S. companies yet to go public, Uber is one of the few that's valued higher than Airbnb. Uber has a valuation of $66 billion as of June 8, 2016.
At a luncheon hosted by the Economic Club of New York on March 13, CEO Brian Chesky said going public was a two-year process, according to CNBC.
Chesky also said at the luncheon that Airbnb was halfway through that process.
He reportedly doesn't want to rush the process and said he's seen too many companies fail by trying to rush an IPO.
If it's halfway through the IPO process, Airbnb could go public in the first half of 2018.
Right now, there is not an Airbnb stock symbol.
The symbol "AIRBNB" would be available if the company wanted to use it. If Airbnb wanted to use the symbol "AIR" to make it shorter, that also appears to be available.
Companies want to use stock symbols that are similar to their company name so they can be easily identified by investors.
That means the Airbnb stock symbol will most likely be "AIRBNB," or "AIR."
We don't have a stock price per share for Airbnb yet.
However, there will be two different Airbnb IPO prices Money Morning readers need to be aware of...
Before retail investors can buy Airbnb stock, there will be an Airbnb IPO offering price only available to big banks, wealthy investors, and large institutions. And the IPO offering price is normally cheaper than what retail investors will pay.
Once the stock begins trading, there will be an opening price that any investor can buy in at. However, this will likely be much higher than the offering price.
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For example, the Snap Inc. IPO offering price was $17 per share for insiders.
But when SNAP stock was available for retail investors on March 2, they had to pay $24 per share. That's because the initial demand for SNAP stock was so high that the price was bid up even before hitting the market. The SNAP stock price closed at $24.48 per share that day, which means retail investors who bought in at the opening price made a small profit of 2%.
However, those big banks and large institutions that paid $17 per share made huge profits of 44% from the offering price.
So when you hear about the 40% or 50% gains made in one day from IPOs, it's never the retail investors who make those gains.
Now that we've looked at all of the details of the Airbnb IPO, we've come to the most important question of all...
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Money Morning Director of Tech & Venture Capital Michael A. Robinson does not recommend retail investors buy in at an opening IPO price.
But for those who really want to own Airbnb stock on the first day of trading, Robinson has a strategy to minimize risk and maximize profits.
"If folks still want to buy in what we call the after market, then by all means they absolutely must put in a limit order. I recommend no more than 10% above the suggested offering price. That way you don't buy at the high point of the day only to see it fall that session or over the next few trading days," Robinson told me on March 9.
But if investors still want a piece of the Airbnb IPO action, there are two better investment strategies than investing in Airbnb directly.
The first Robinson recommends for Money Morning readers is the First Trust U.S. Equity Opportunities ETF Fund (NYSE: FPX).
"With it, you can grab the upside and excitement that IPOs offer - and sidestep all the volatility inherent in new issues. In other words, let the fund managers do all the heavy lifting while you sit back and watch the profits pile up," Robinson said.
While FPX doesn't specialize in just new tech stocks, it does mirror the broader market for IPOs.
And with 102 stocks in its holdings, the fund provides more diversification and limits the risk of owning just one stock.
For example, Snapchat represents 0.25% of FBX's holdings. But Facebook Inc. (Nasdaq: FB), a more proven and profitable company, represents 3.71% of FBX's holdings. If the Snapchat stock price falls, the losses can be offset by Facebook, which has climbed 27.04% over the last 12 months.
The second way to play the Airbnb IPO is through its suppliers.
When I researched the Airbnb supply chain, I discovered a list of three major suppliers:
Each of these companies provide cloud-computing services for Airbnb. Having a client like Airbnb is impressive, and it's only going to help these three stocks climb.
You see, companies would rather pay to use a cloud-computing service than build their own infrastructure. A systems administrator to run a company's cloud could cost $120,000 or more per year, which doesn't include salary benefits.
Some of Box's business plans cost as little as $5 per month for secure file sharing and collaboration.
And the trend of "renting" cloud services is only going to grow...
For 2016, Statista projected global revenue for the enterprise cloud-computing market was $48.7 billion. By 2019, that's expected to skyrocket to $80.7 billion in revenue.
That's a 65.70% increase in three years.
In the next year alone, the AKAM stock price is expected to climb 11%; the NEWR stock price, 18%; and the BOX stock price, 25%.
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