WeWork agrees $9 billion SPAC merger to finally get stock market listing

FILE Image: A male walks out of a WeWork area in the Manhattan borough of New York City, New York, U.S., October 4, 2019. REUTERS/Carlo Allegri

March 26, 2021

By Niket Nishant, Noor Zainab Hussain and Joshua Franklin

(Reuters) – WeWork mentioned on Friday it has agreed to go public by way of a merger with blank-test firm BowX Acquisition Corp, enabling the business-sharing enterprise to comprehensive a stock industry listing two yrs immediately after its failed initially attempt.

The merger with BowX, a specific goal acquisition enterprise (SPAC), values WeWork at all around $9 billion, a steep fall from the $47 billion the cash-losing organization was value in a 2019 private funding spherical led by Japanese conglomerate SoftBank Group Corp.

Later on in 2019, WeWork attempted an first community providing but pulled the options owing to trader fears above its small business design and co-founder Adam Neumann’s administration style.

Neumann ultimately stepped down as main executive. Sandeep Mathrani is now CEO, and his operate has incorporated cutting charges by $1.6 billion, according to WeWork.

“Sometimes you do not pick the path (and) a path picks you. In December, we have been approached by BowX and other SPACS,” Mathrani told CNBC in an interview.

“We experienced viewed a path to profitability and we believed it was a fantastic time to increase additional liquidity to de-chance the equilibrium sheet, and to make guaranteed that we have a path to profitability,” Mathrani added.

BowX shares on Nasdaq ended up up 8% in morning trading.

SoftBank, WeWork’s biggest backer, will retain a majority stake in the organization right after the deal. SoftBank and other buyers have agreed to a one particular-yr lock-up on their shares, in accordance to a person acquainted with the subject. Present-day shareholders will very own about 83% of the blended business.

SPACs like BowX are shell providers that elevate resources in an IPO with the aim of merging with an unidentified non-public organization. For the enterprise being acquired, the merger is an substitute way to go community about a regular IPO.

‘OPPORTUNITY STOCK’

Prospective traders in WeWork’s 2019 IPO have been in portion spooked by losses that stretched into the billions of bucks with no clear path to profitability.

WeWork has nonetheless to transform a revenue. Its adjusted EBITDA, a evaluate of a business’ fundamental profitability, was -$1.8 billion in 2020. WeWork forecasts this will be -$900 million in 2021 but predicts it will realize running profitability of $500 million in 2022.

WeWork has also had to climate the COVID-19 pandemic, which led to lots of business staffers doing work from household. WeWork’s revenues for 2020 were being flat at $3.2 billion, but the firm and true estate field gurus count on there will be escalating need following the pandemic for the sort of flexible offices supplied by providers like WeWork.

“We think that WeWork is heading to be the chance inventory for the recovery,” BowX co-CEO Vivek Ranadivé explained to CNBC.

In total WeWork expects to raise $1.3 billion in cash from the merger, funded by the $420 million BowX raised in its IPO in August and an $800 billion private investment in public equity (PIPE) from traders which includes Perception Associates, Starwood Capital Team and Fidelity Administration.

BowX had originally looked to raise $500 million for the PIPE but increased this because of to trader desire, in accordance to people today familiar with the make a difference.

PJT Companions was WeWork’s money adviser on the deal. UBS Group AG recommended BowX.

(Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Joshua Franklin in Boston Further reporting by Herb Lash in New York Editing by Ramakrishnan M., Arun Koyyur, Saumyadeb Chakrabarty and Dan Grebler)