WeWork, a dominant player in the market for flexible office space, has agreed to go public through a merger with blank-check firm BowX Acquisition Corp (NASDAQ:BOWX) that values the start-up at $9 billion including debt, the Wall Street Journal reported on Friday.
Citing people familiar with the matter, the Journal said WeWork would raise $1.3 billion, including $800 million in a so-called private investment in public equity, or PIPE, from Insight Partners, funds managed by Starwood Capital Group, Fidelity Management, and others.
The office-sharing start-up’s plans for its high-profile initial public offering (IPO) imploded in October 2019 due to investor concerns over the office-sharing startup’s business model.
“The company is taking advantage of a torrent of new special purpose acquisition companies (SPACs) to accomplish what it failed to pull off in 2019, when public investors rejected the money-losing company and its visionary yet erratic leader, Adam Neumann, who subsequently resigned as chairman and CEO,” the Journal reported.
A SPAC is a shell firm that uses proceeds from an IPO to buy a private firm.
A $9 billion valuation is a far cry from the $47 billion that WeWork was valued at in a private round of financing from SoftBank Group Corp (OTCMKTS:SFTBF) (FRA:SFT) in 2019. The Japanese technology investor was later forced to rescue WeWork and now holds a majority stake.
BowX Acquisition raised $420 million in its IPO in August last year as an empty shell and then set out to find a business to combine with. Private companies are flocking to SPACs, to bypass the traditional IPO process and gain a public listing.
“The move will allow WeWork to trade a publicly-listed stock without the kind of scrutiny that kyboshed its abortive 2019 listing,” said Neil Wilson, chief market analyst at Markets.com.
“Occupancy fell to 47% from 72%, but the company expects to rebound to 90% next year, which seems optimistic. As does an expected doubling of revenues to $7 billion by 2024. We looked at the leasing structure back in 2019 in some depth and it is hard to see how WeWork will gain more customers as the effects of the pandemic seem set to linger.”
Contact the author Uttara Choudhury at [email protected]
Follow her on Twitter: @UttaraProactive