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‘It’s truly surreal’: After rough pandemic ride, Airbnb shares soar in public debut

13 years ago, investors laughed at the idea. Now they can't get enough of Airbnb.

‘It’s truly surreal’: After rough pandemic ride, Airbnb shares soar in public debut

The travel startup had entered the year as an IPO darling with set plans to go public that spring. It'll exit the year as an IPO darling, too.

Photo: Airbnb

The news that Airbnb's price was set to double in its long-awaited public offering left its CEO and founder Brian Chesky literally speechless.

The travel startup had entered the year as an IPO darling with set plans to go public that spring. It'll exit the year as an IPO darling, too. The company's share price more than doubled in its trading debut, from the $68 price set the night before to $146 at opening. It ended up closing the day slightly below open at $144.71, up 112% in its blockbuster debut and giving it a market cap of over $86 billion. But its rebound and path to the public markets has surprised even its founders.

"I'm kind of overwhelmed with gratitude, because we did not expect to be at this place given how this year took a surprise turn back in the spring," Airbnb's co-founder Nate Blecharczyk told Protocol. "We had intended to go public earlier this year, and all that was put on hold when March and April came, as a result of the pandemic. If you'd asked me then would we be in a position to go public before the end of the year, I would've been shocked that that was possible."

The path from March to its December IPO includes some of the hardest months the business and the broader travel industry has endured after trips halted amid a pandemic. "One of the hard things about the pandemic has been the fact that it wasn't obvious how long it would go on for and how severe the impact would be. So, in March and April, we were anticipating the worst. We had lost 80% of our revenue in two weeks. And we couldn't really confidently say when that was going to improve," Blecharczyk said.

Airbnb instituted weekly board meetings from March 5, the day Sequoia released its infamous "Black Swan" memo, to May 5. "People who are prepared, they slam on the brakes, they assess the situation until they can see clearly and then they accelerate out of the turn," said Sequoia partner and Airbnb board member Alfred Lin. "We saw Airbnb and DoorDash [another Sequoia investment] do that."

To stay alive, Airbnb quickly raised $2 billion in debt deals. It also had to lay off around 25% of its employees, canceled summer internships and ended up shuttering some of its experimental units like Flights to focus on its core home-sharing business.

"One of the most important things we learned is you can have large ambitions, but you need a unifying strategy across different ideas, rather than separate ideas," Lin said. "These kinds of crises force founders to focus, and they went back to what was most important to them."

Slowly, travel started to rebound, just in a way that was different than before the pandemic. Airbnb saw that people were looking to stay in areas within driving distances near their house and for longer-term rentals, an area that Airbnb doubled down on, much to the chagrin of housing critics. It also reminded the founders of Airbnb's founding days in the last recession where it saw a lot of people who lost their jobs turn toward hosting guests to make extra money.

Airbnb's most recent financial statements show that revenue in the last quarter remains depressed from last year, but is only down 19% year-over-year — much lower than the more than 60% decline faced by competitors like Marriott. But it was still a profitable quarter for the company.

"The scale of their ambition is huge," Lin said. "What the pandemic taught them is to be focused, and I think that's not going to change."

While there are hopes to rehire some of the employees who were laid off as the industry rebounds, Airbnb doesn't plan to immediately dive back into some of its previous ambitious projects in 2021.

"Things like flights, etcetera, are interesting opportunities longer term, but I don't think that's really what's most important right now," Blecharczyk said. "They aren't perishable opportunities, so maybe in the future, someday, but for the foreseeable future, we're going to be focused as a company, and we think there's a lot of opportunity in our core business."

Now that the company's public, Blecharczyk doesn't expect much to change in terms of its operations, but he does hope that the public perception and investor sentiment may realize how much Airbnb has gone mainstream. In fact, some of the IPO buzz around the stock may be a result of investors expecting the startup to enter a major index in the next few years, according to CNBC.

"I think it's a milestone moment and a continuation of Airbnb going mainstream. I've been thinking about that a lot today, because 13 years ago, it was such a crazy idea that people laughed at us," Blecharczyk said.

Now, instead of laughing, people are investing, not only in the belief that a future COVID-free world will mean more travel, but also that they'll be doing it on Airbnb.

"To see the enthusiasm for the future of the company today, whether that be from investors or just in general, it's truly surreal to me," he said. "It takes my breath away a little bit because for so long we've been something that people are skeptical about because it's such a new thing and required so much trust."

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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