WeWork to go public with help of merger
After a failed initial public offering and the near implosion of its business in 2019, WeWork said Friday that it has agreed to a deal that would take the beleaguered co-working company onto the stock market.
Instead of a traditional initial public offering, WeWork is merging with BowX Acquisition, a special purpose acquisition company, in a type of deal that has become hugely popular in recent months.
BowX is backed by Bow Capital, an investment firm that counts National Basketball Association star Shaquille O’Neal as an adviser.
WeWork leases office space and then effectively sublets it to its members, which include individuals, start-ups and large corporations. Its heady expansion was fueled by SoftBank, the Japanese conglomerate that became WeWork’s largest shareholder and rescued the company in 2019 just as it was about to run out of cash.
WeWork said the deal with BowX gave it an equity value of $7.9 billion, far less than the nearly $50 billion value that its investors placed on 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 emptied WeWork’s offices, and it is not clear how much demand there will be for its office space.
Many people have become used to working from home, and some large employers like Target and Dropbox have said they plan to give up big chunks of their office space because they expect fewer employees to come in daily. Other businesses like the retailer REI sold their headquarters altogether.
WeWork said Friday that memberships fell to 476,000 last year, from 619,000 in 2019.
Still, BowX Chief Executive Officer Vivek Ranadive told CNBC in an interview Friday that the pandemic would be a “tail wind” for the office-sharing company.
A company presentation released Friday said WeWork lost $3.8 billion last year, about the same as in 2019. The 2020 loss included a $1.4 billion writedown of intangible assets. Last year, WeWork’s operations consumed $857 million of cash, up from $448 million in 2019.