Airbnb is raising $1 billion amid fallout from coronanvirus

Key Points
  • Airbnb raised $1 billion in a new round of funding led by Silver Lake and Sixth Street Partners.
  • However, the company's valuation has fallen to about $26 billion from $31 billion in 2017 as its business slows due to the coronavirus pandemic.
  • It's still unclear if Airbnb plans to go public this year.
Airbnb CEO Brian Chesky.
John van Hasselt | Corbis | Getty Images

Airbnb is raising $1 billion, even as the coronavirus crisis hits the travel and hospitality industries especially hard.

In a press release, Airbnb says that private equity firms Silver Lake and Sixth Street Partners will invest $1 billion in a combination of debt and equity that will support Airbnb's ongoing work to invest over the long term.

The company did not disclose the latest valuation. But in early March, it lowered its internal valuation to $26 billion, from the $31 billion figure it raised money at in 2017, according to two sources familiar with the matter. Over the last month, travel stocks Expedia and Booking Holdings have declined about 40% and 17%, respectively. 

The terms of the round were not disclosed, but a source familiar with matter said, "there is no rachet or any other coercive terms. It's attractive for Airbnb." The source added the funding doesn't depend on Airbnb's performance or reaching a target date to go public.

The fundraising comes as travelers cancel trips amid the global coronavirus pandemic and the start-up grapples with a slowdown in bookings. 

It also bucks the trend of venture capital deals simmering down as the markets plunge on coronavirus fears. Investors told CNBC they predict fundraising rounds generally stalling and reaching less eye-popping valuations. 

As CNBC reported last month, Airbnb has fielded "significant interest" from investors over the last few weeks. 

Silver Lake and Sixth Street are new investors and, according to a source, the company chose them because they are "focused on the mission" and "believe travel is enduring." 

Private equity deals in the U.S. involving tech companies have grown in recent years as some of the sector's best-known names boost their capital for such deals. 

In early March, Twitter announced a $1 billion investment from Silver Lake

Sixth Street Partners, launched in 2009 with seed money from TPG, has over $34 billion in assets under management. 

In a press release, Silver Lake Co-CEO and Managing Partner Egon Durban said, "while the current environment is clearly a difficult one for the hospitality industry, the desire to travel and have authentic experiences is fundamental and enduring." 

He added that Airbnb's business model is "particularly well suited to prosper as the world inevitably recovers and we all get back out to experience it."

Morgan Stanley served as financial advisor to Airbnb and Simpson Thacher served as legal advisor to Airbnb.  Kirkland & Ellis served as legal advisor to Silver Lake and Sixth Street Partners. Goldman Sachs also advised Airbnb.

It's still unclear how a fundraising round could impact the company's plans to go public. Airbnb had said it planned to debut this year, but the economic shift resulting from the COVID-19 pandemic has thrown that possibility in question again. 

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