By Natalie DeCoste
WeWork has agreed to merge with a special-purpose acquisition company (SPAC) in a push to take the company public two years after its high-profile failure to do so.
WeWork is a commercial real estate company that provides flexible shared workspaces for technology startups and services for other enterprises. The company builds both physical and virtual spaces.
The company’s business model is primarily to sign long-term leases with landlords and then renovate and furnish the space. WeWork subleases small offices or whole buildings to tenants for short periods, sometimes as little as a month at a time.
The company plans to merge with BowX Acquisition Corporation. According to both companies’ announcements, WeWork is valued at $9 billion, including debt.
BowX was formed by the management of venture capital fund Bow Capital. Vivek Ranadiv, who also owns the NBA team the Sacramento Kings, and Murray Rode are the co-CEOs of the SPAC. According to BowX’s SEC filings, it initially set out to acquire a business in the technology, media, and telecommunications industries aiming to invest in companies that capitalize on trends in digital transformation.
“WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn. As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever. Having Vivek and the BowX team will be invaluable to WeWork as we continue to define the future of work,” said Sandeep Mathrani, the CEO of WeWork.
The current valuation is a steep drop from the $47 billion at which WeWork was previously valued in 2019 ahead of a failed listing plan. The previous move to go public failed due to investor concerns over its business model and its founder Adam Neumann’s management style.
In 2019 Goldman Sachs bankers said the company’s valuation could hit as much as $65 billion. That prediction was short-lived as SoftBank was forced to extend a life-saving financing lifeline to WeWork. The company had to tell its investors that it lost about $3.2 billion last year as part of its pitch for a stock market listing.
“SoftBank has always seen the potential in WeWork’s core business to disrupt the commercial real estate industry and reimagine the workplace. Today, we take another step towards making that vision a reality. The pandemic has fundamentally changed the way we work, and WeWork is incredibly well positioned to springboard into a future propelled by digital technology and a new appreciation of the value of flexible workspace. We look forward to having BowX as our partner as we look to the next chapter,” said Marcelo Claure, Executive Chairman of WeWork.
As part of the new merger, WeWork will raise $1.3 billion, including $800 million in what is known as a private investment in public equity, or PIPE, from Insight Partners, funds managed by Starwood Capital Group, Fidelity Management, and others.
