An example of a prospectus in action
Rental specialist Airbnb (ABNB +1.95%) filed its prospectus as part of its S-1 filing with the SEC in November 2020, one month before its IPO. In addition to the prospectus that constituted Part I of the filing, the company also included a Part II section that detailed expenses related to the issuance and distribution of the company's Class A common stock, the recent sale of unregistered securities, acquisitions, stock warrants, and other information.
With its prospectus, Airbnb laid out the history of its founding, how the company makes money by connecting property hosts with renters through its platform, and recent financial performance, noting the negative effects of the COVID-19 pandemic. As noted in the prospectus, total revenue rose 32% annually to reach $4.8 billion in 2019, and gross bookings conducted through the company's platform rose 29% to reach $38 billion. However, across the first nine months of 2020, revenue fell 32% year over year, and gross bookings fell 39% due to the pandemic.
While the prospectus showed that Airbnb's business had taken a substantial hit due to travel restrictions and social-distancing conditions, it also detailed how the company was responding to the challenge and revealed other positive attributes. The document showed that the company had been posting strong free cash flow before the pandemic and was adopting effective cost-cutting measures in response to the challenges at hand. It also showed that Airbnb's team of co-founders was hugely invested in the company's success. When the public offering for the stock was held in December 2020, the share sale raised $3.5 billion -- making it the year's biggest IPO.
