Owe

Slack's spot at the Wall Street lunch table — Airbnb's not invited (unless it pays for everyone)

Thursday, April 9, 2020 by Snacks
"_You're too risky to sit with now_"

"You're too risky to sit with now"

The risky table is at the back... Airbnb and Slack just sealed 2 nearly identical deals, with two very different deal terms. Slack's office messaging, email-crushing biz model is thriving in the corona-conomy. Airbnb's travel-centric pad rental biz? Not so much. Despite these differences, they both decided it was time to borrow some cash.

  • Slack offered $750M in debt, which it'll have to pay back in 2025 (either in cash, shares, or a combo). Slack will only have to pay 0.5% interest on the loan.
  • Airbnb offered $1B for similar debt, but it'll have to pay investors back at a whopping more than 10% interest rate.

What's your risk premium?... Not a Hinge-appropriate question. Slack is borrowing cash because it's growing (to thrive) — Airbnb is borrowing because it's sinking (to survive). That makes it way more risky. Investors can smell desperation:

  • As bookings plunge and cancellations soar, Airbnb is refunding guests and shelling out $250M to cover hosts' losses. It projects sales could fall by 54% this year.
  • So investors demand a 10% premium for putting their money at risk with Airbnb, while Slack gets to borrow for way less cost.
THE TAKEAWAY

The virus premium is unavoidable... for Airbnb, WeWork, and any travel/rental company unable to operate right now. Most are affected by this risk premium, because we're living in risky times. And companies that are faring well in the corona-conomy — like Slack, Zoom, and Netflix — can't pat themselves on the back either. They're just lucky that their businesses weren't as affected as others by unforeseeable circumstances.

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