Inside Airbnb, employees eager for big payouts pressured it to go public

SAN FRANCISCO – Last summer, several Airbnb employees wrote a letter to the founders of the online room rental company.

On behalf of more than a dozen employees, they begged to be able to sell their Airbnb stock options. Because Airbnb is privately owned, its shares cannot be easily traded or redeemed. Therefore, the employees also asked that the company go public, a move that would allow them to freely sell their shares, said five people who saw or were informed about the document and were not authorized to speak publicly.

The letter was a sign of the tension that has built up among Airbnb workers.

Based on interviews with more than a dozen current and former employees and investors, most of whom declined to be identified for fear of retaliation, Airbnb’s 6,000-strong workforce has grown increasingly frustrated at not being able to collect fees. company shares received. in compensation packages. Waiting for the startup to go public has become a growing source of stress, many said, preventing some from making career changes, starting a family or moving on with their lives.

Questions about the IPO have risen to the top of an internal message board where employees vote on topics executives must address every few months, the people said. Discontent has been exacerbated as Airbnb, which has been valued at $ 31 billion, distributed two tranches of employee capital that will begin to expire in November 2020 and mid-2021; Those shares will lose their value if the company goes public by then, they said.

To try to keep employees happy, Brian Chesky, Airbnb’s chief executive, and other top executives have made some adjustments, the people said. They began offering long-time employees sabbaticals, expanded Airbnb’s parental leave policy, and increased the retirement program. They also created a program to provide low-interest general purpose loans of hundreds of thousands of dollars to employees. In performance reviews this spring, the startup issued higher bonuses and raises, one of the people said.

On Thursday, Airbnb took the biggest step of all: it launched a one-sentence ad saying he planned to go public next year.

“We are deeply committed to our employees, and our long-term focus has helped build a company that is very successful and true to our mission and values,” said Chris Lehane, Airbnb’s senior vice president of policy and communications, in a statement. He added that Airbnb was consistently rated a great place to work “because of the spirit, energy, values ​​and morale of our employees.” He declined to comment on the employee’s letter.

Vivek Wagle, a marketing executive who left Airbnb in 2014, said Thursday’s announcement “was definitely good news for a lot of early hires, that we may wonder if we would be rewarded for our part in the success of the company. “.

The Airbnb situation illustrates a startup dream paradox. Many tech workers join fast-growing private companies in the hopes of winning shares in the companies and turning those shares into wealth when the new companies go public. But employees depend on the founders and the company’s board of directors before that becomes a reality.

Chesky, who co-founded Airbnb in 2008, has spoken out about not rushing to go public. In January 2018, posted a letter saying the company will have an “infinite time horizon”. It is now exploring a non-traditional initial public offering by potentially listing the shares directly, or on the Long Term Stock Exchange, which is backed by venture capital but is not yet operational, said three people with knowledge of the situation.

Doug Leone, a venture capitalist at Sequoia Capital, one of Airbnb’s backers, said that while startups had “an implicit social contract” to go public at some point, they were in no rush to do so. “The IPO is just a moment in time,” he said.

However, Chesky’s slow stance has become problematic as other high-profile startups of the same generation as Airbnb have started listing their shares on the stock market. This year, the ride-sharing companies Uber and Lyft, the online bulletin board company Pinterest and the enterprise software maker Slack are among those that have been made public. That has allowed its employees to collect their shares.

Employee tension is unusual at Airbnb, known for its joyous mission to “belong anywhere” and for fostering a Kumbaya culture among its staff. The company has grown rapidly, with more than seven million ads in 100,000 cities. In the second quarter, its revenue exceeded $ 1 billion. Many employees work in a spacious building in San Francisco, which has rooms that reproduce their famous listings. Several former employees said they were grateful for the windfall they would eventually receive from their shares.

Credit…via Airbnb

But any rewards for owning Airbnb shares have been withheld. Beginning in 2011, when the young company surpassed a $ 1 billion valuation, Airbnb banned workers from selling shares, while allowing its three founders, Chesky, Nathan Blecharczyk and Joe Gebbia, to collect a total of $ 21 million.

In its early days, Airbnb paid employees in part by granting stock options, which allowed them to buy, or “exercise”, shares of the company at a low price. Later, Airbnb began offering a different form of equity compensation, called restricted stock units, which don’t need to be purchased.

Gabriel Cole, who worked in Airbnb’s food department, said he had spent his life savings to buy his shares after leaving the company in 2015. That generated a $ 180,000 tax bill, which he couldn’t pay, said.

“I was returning bottles to buy food,” he said. He said he had asked the founders of Airbnb for help and had been told there was nothing that could be done.

Over the years, Airbnb has expanded the rules on exercising stock options to make “golden handcuffs” less onerous. In 2016, it allowed long-time employees who were still with the company sell portions of your stock. Those who sold had to accept stricter restrictions on the offering of the remaining shares.

But those changes didn’t benefit all Airbnb shareholders. Some current and former Airbnb employees have attempted to circumvent the bans by selling their shares on a hidden or secondary market for the sale of private shares. In recent weeks, those Airbnb shares have traded as high as $ 166, implying a fully diluted valuation of the company of $ 52 billion, said three people familiar with the secondary market.

Investment firms have also sprung up to offer loans to former Airbnb employees, using their shares as collateral, in what is known as a “prepaid variable-term contract.” Firms aggressively court former employees, often flooding them with offers for their shares the moment they change their job status on LinkedIn.

The transactions generally involve a cash loan in exchange for a pledge of shares to a buyer at an agreed price when the company goes public, according to investment offers seen by The New York Times. Companies charge up to 15 percent and more for insurance. Former employees who made these deals said they existed in a legal gray area, not authorized by Airbnb, but not explicitly prohibited.

“Opportunistic brokers and firms pressure them because of their high fees,” said Barrett Cohn, CEO of Scenic Advisement, which works with companies on the sale of secondary shares. “They are dangerous for buyers and sellers, and expensive.”

When the small group of Airbnb employees sent their letter to Chesky and other top executives last year, they received no response, said two of the people who saw or were informed about the letter.

At the same time, Airbnb took several actions that seemed to indicate that it was preparing for a public offering. It added independent board members and hired Dave Stephenson, a seasoned finance executive, from Amazon to become its chief financial officer. Current and former employees said they had taken the steps as a sign that the company was finally ready to hit the stock market.

In February, Stephenson was injured in a skiing accident. That slowed down Airbnb’s IPO schedule, two people with knowledge of the situation said. An Airbnb spokesperson said the accident had no impact.

On Thursday night, at an informal Airbnb alumni gathering in San Francisco, the company’s announcement that it would be released next year was the topic of the day. But attendees saved their enthusiasm for when the company officially shows up to do so, two people who were present said.

Until then, an attendee said in a text message, the general sentiment is “🤷”.

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