After a failed initial public offering and a near collapse of business in 2019, WeWork said on Friday that it had agreed to an agreement to bring the disregarded partnership up. stock market.
Instead of a traditional IPO, WeWork is merging with BowX Acquisition, a special-purpose acquisition company, in a type of deal that has become extremely popular in recent months.
BowX is supported by Bow Capital, an investment firm that takes the star of the National Basketball Association Shaquille O’Neal as an advisor.
WeWork effectively leases office space and then effectively leases it to members, including individuals, startups and large corporations. Its dramatic expansion was spurred by SoftBank, the Japanese conglomerate that became WeWork’s biggest shareholder and rescued the company in 2019 just as it was about to run out of cash.
WeWork says the deal with BowX gave it an equity value of $ 7.9 billion, far below the nearly $ 50 billion worth of its investors placed in the company. in 2019. WeWork will receive $ 1.3 billion in cash from the deal, including $ 800 million from Insight Partners, Starwood Capital Group, BlackRock and other investors.
The pandemic wiped out WeWork’s offices and it is not clear how much demand for WeWork will be in the future. Many are accustomed to working from home and some major employers like Target and Dropbox say they plan to give up large chunks of office space because they expect fewer employees to come to work every day. Other players such as the retailer REI have sold the headquarters together. WeWork said Friday that the number of members dropped to 476,000 last year, from 619,000 in 2019.
However, BowX’s chief executive, Vivek Ranadivé, told CNBC in an interview on Friday that the pandemic would be a “breeze” for the office-sharing company.
“Companies have now decided that flexible space is a must,” said Ranadivé, a technology entrepreneur who owns the soccer team. Sacramento Kings basket. “Maybe for their own headquarters, they want to own that space. But for everything else, they want to hand it over to WeWork ”.
WeWork says it has reduced costs since the failed public offering. The company is expecting a spike in revenue in the coming years. It also gives good forecasts for pre-interest income, taxes, amortization and amortization, a measure that is often flattering in terms of cash flows, but doesn’t say how much its return may be. In the past, it has struggled to meet lofty forecasts. And it has to try to attract tenants at a time when the office markets in New York, London, San Francisco and other major cities are flooded with cheap rental space.
“We’ve looked at our plans, we see what we’ve achieved by 2020 – and we’ve seen the path to profitability – and we think it’s a good time to go further. liquidity, ”Sandeep Mathrani, chief executive of WeWork, told CNBC on Friday.
A company presentation released on Friday said WeWork lost $ 3.8 billion last year, the equivalent of 2019. Losses in 2020 include $ 1.4 billion recording a decrease in intangible assets. . Last year, WeWork operations cost $ 857 million in cash, up from $ 448 million in 2019.
The road to a deal was cleared last month when Adam Neumann, the co-founder of WeWork and SoftBank, settled a legal dispute. WeWork stopped its IPO in 2019 after investors faltered at its losses and criticized its governance methods.
SoftBank has been eager to take WeWork to the public through a special-purpose acquisition, or SPAC, a road to Wall Street that has become increasingly popular in recent months as it is faster than a batch. Ordinary public offering. As of Wednesday, 295 SPAC was made public by 2021, raised $ 93 billion and broke last year’s record in a few months.
SoftBank has poured billions of dollars into WeWork after Masayoshi Son, CEO of SoftBank, bought Mr. Neumann’s ambitious vision, which includes building schools and serviced apartments in addition to office rentals. . In total, SoftBank has supported WeWork with nearly $ 16 billion, including investments in the company, loans and payments to existing shareholders. After WeWork goes public, SoftBank will be able to sell or hold its stake in the hope it will increase in value.