Airbnb’s plan to offer shares to hosts shows gig economy under stress
October 1, 2018 | Blog

Airbnb’s plan to offer shares to hosts shows gig economy under stress

2018 Alternative Accommodations Consumer Survey

In 2015, author Steven Hill’s “Raw Deal” hit book stores.

Reviewing the book for the San Francisco Chronicle, I wrote: “For just as (Hill) perfectly captures the anxiety of the American worker in today’s increasingly digital economy, he directs the same populist rage toward on-demand companies…effectively drowning out much of anything worthwhile he has to say.”

I obviously didn’t like the book. But nearly 3 years later, Hill’s scathing critique of the growing wealth and income gap in the United States, as evidenced in the growing gig economy dominated by Uber and Airbnb, rings true.

Hill warned America was becoming a nation of contract workers, driving cars and renting out homes to make ends meet because they lacked regular pay and benefits. Left to fend for themselves, Hill argues, these workers will no longer be able to afford the goods and services the U.S. economy produces.

“In a sense, employers and employees used to be married to one another, and there was a sense of commitment and a joined destiny,” Hill writes. “Now employers want a bunch of one-night stands with their employees, a promiscuousness that promises to be not only fleeting but destabilizing to the broader macroeconomy.”

A more substantive relationship

Airbnb appears to have reached a similar conclusion. Not the part about paying contractors wages and benefits. But rather the need for a more substantive relationship between Airbnb and the people crucial to its business.

Last month, Airbnb wrote to the U.S. Securities and Exchange Commission, requesting the agency allow the company to issue stock to hosts.

“Airbnb believes that twenty-first century companies are most successful when the interests of all stakeholders are aligned,” the letter said. “For sharing economy companies like Airbnb, this includes…our hosts who use our marketplace to list unique accommodations and experiences.”

“As a sharing economy marketplace, Airbnb succeeds when these hosts succeed,” it continued. “We believe that enabling private companies to grant hosts and other sharing economy participants equity in the company from an earlier stage would further align incentives between such companies and their sharing economy participants to the benefit to both.”

Economy never fully recovered from the Great Recession

For years, Airbnb and other on demand giants like Uber have vehemently fought efforts to classify gig workers as employees. Offering pay and benefits to freelancers would undermine their cost structure. But Airbnb’s letter suggests that the company realizes that flexible hours and extra cash is no longer sufficient compensation to gig workers.

The U.S. economy has never fully recovered from the 2007-2009 Great Recession, the country’s worst economic downturn in nearly 80 years.

Real wage growth, which considers inflation, has barely budged, despite a tight labor market and strong GDP growth. From August 2017 to August 2018, real average hourly earnings increased just 0.2 percent, according to the federal Bureau of Labor Statistics.

Unemployment stands at 3.9 percent but the percentage of the adult U.S. workers who are underemployed (those who work part time or earning wages significantly below their education and professional qualifications) could be as high as 14 percent.

The stock market is performing well but fewer Americans are owning shares. In fact, stock ownership has grown increasingly concentrated among the richest Americans, according to study on household wealth published last November by the National Bureau of Economic Research (NBER).

In 2016, people who made $250,000 or more a year (5.2 percent of U.S. households) owned 60.5 percent of all stocks; in 2001, the same income group (2.7 percent of U.S. households) owned 40.6 percent of all stocks.

Or put another way, the top 10 percent of U.S. households by wealth own 84 percent of all stocks in 2016.

Spread the wealth

In lieu of this reality, SEC Chairman Jay Clayton recently said that he wants to make it easier for Main Street investors to access the private markets, including the stock of unicorn firms like Uber and Airbnb. The private markets, Clayton noted, is awash in capital and ordinary investors, not just rich ones, should be able to participate.

With its request to the SEC, Airbnb also seems to be saying it want to share the wealth to a broader group of people.

Of course, equity is not really a substitute for income and benefits. In his book, Hill said companies should create something called a multiemployer plan in which they pay into a fund to help pay for the health care costs of gig workers.

Companies could also contribute to Individual Security Accounts, he said, in which employers would pay into each worker’s account a pro-rated amount to subsidize benefits like paid sick days, vacation and holidays, based on the number of hours people worked or a percentage of gross wages.

Three years ago, when I reviewed Hill’s book, I would have said that’s unlikely to happen. Today, given Airbnb’s stock plan, we’ve made a small, but potentially significant, step towards this vision.

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CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.

Thomas Lee

Thomas Lee

Thomas Lee is the Senior Writer at SharesPost. He was previously a business columnist at the San Francisco Chronicle. Lee has written for the Star Tribune in Minneapolis, St. Louis Post-Dispatch, and Seattle Times. He is author of “Rebuilding Empires” (St. Martin's Press), his book on the future of big box retail in the digital age.
PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.