Troubled shared-office provider WeWork is set to merge with a special-purpose acquisition company two years after its plans to go public ended in spectacular disarray.
The planned merger with BowX Acquisition, a publicly listed investment vehicle, values WeWork at $9bn including debt, a far cry from the $47bn WeWork was valued at in a private round of financing from SoftBank Group in 2019.
The company shook up the office rentals market, styling them for a new generation of businesses by adding communal areas with beer taps and foosball tables. It continues to describe itself in tech, rather than property, terms, recently telling investors it is an “asset light platform for managing and orchestrating flexible space”.
In its heyday WeWork’s growth was exponential and the company expanded into other areas including private rentals and education. But its losses were also massive – $2.9bn in the three years before its aborted initial public offering. And the erratic behavior of its founder and former chief executive, Adam Neumann, also put off investors.
The new deal would allow WeWork to raise $1.3bn in new money and comes at a time when some are expecting a return to office life as increasing vaccinations against coronavirus begin to control the Covid 19 pandemic.
WeWork lost $3.2bn last year as the pandemic shuttered its offices, according to documents seen by the Financial Times. Occupancy rates plummeted from 72% before the pandemic hit to just 47%. In the documents the company projected that occupancy would reach 90% by 2022, far above its pre-pandemic levels.
Sandeep Mathrani, chief executive of WeWork, said: “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.”
Bow Capital Management, sponsor of the special-purpose acquisition company (Spac), is run by Tibco Software Vivek Ranadivé, owner of the National Basketball Association’s Sacramento Kings. The basketball great Shaquille O’Neal is an adviser to the company.
Spacs are “blank-cheque” companies that have become an increasingly popular way for companies to go public and offer a cheaper, quicker way for a private company to join the stock markets.
Ranadivé said: “With a fantastic core business, I see WeWork as a company at an inflection point, with an incredible roster of key members coupled with the vision and leadership to digitize an enormous industry.”