WeWork to be publicly listed company in merger with BowX
WeWork, the office-sharing business, will become a publicly listed company valued at US$9 billion – about a fifth of its estimated worth in 2019 – in a deal with the publicly traded BowX Acquisition Corp.
The transaction will provide WeWork with approximately US$1.3 billion of cash, which will pay for its expansion plans, the company said in a media release.
WeWork gained widespread public attention in 2019 with a failed initial public offering (IPO). It was "besieged with criticism over its governance, business model, and ability to turn a profit", MSN reported citing a Wall Street Journal article.
The company lost over US$2 billion in 2018, and in September 2019, following mounting pressure from investors based on disclosures WeWork had made in its S-1 filing for the IPO, co-founder Adam Neumann resigned from his position as CEO and gave up his majority voting control.
When WeWork formally withdrew its S-1 filing and announced its IPO postponement, its reported public valuation was around US$10 billion, a drastic reduction from the US$47 billion valuation it achieved in January 2019 and less than the US$12.8 billion it had raised since 2010.
"WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn," said Sandeep Mathrani, WeWork CEO. "As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever."
Mathrani and Executive Chair Marcelo Claure will stay on to lead WeWork, along with the rest of the company’s leadership team. Following the public listing, Vivek Ranadivé of BowX and Deven Parekh of Insight Partners will join WeWork’s Board of Directors.
"I’m thrilled to partner with Sandeep, Marcelo and the entire WeWork team as they continue to transform this business and the real estate industry at large," said Ranadivé, who is Chair and Co-CEO of BowX.
"This company is primed to achieve profitability in the short-term, but the added long-term opportunity for growth and innovation is what made WeWork a perfect fit for BowX. 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 digitise an enormous industry."
WeWork under Mathrani has shut 106 office locations yet still has 851 locations in 152 cities totalling more than one million workstations. Enterprise companies now make up more than 50 per cent of WeWork’s memberships, up from just 10 per cent in 2015. WeWork reported US$3.2 billion in revenue last year – the same as in 2019.
WeWork is backed by Japanese investment giant SoftBank.
BowX, a special purpose acquisition company, is a shell firm that uses proceeds from a public listing to buy a private firm. The firm, led by the owner of the NBA's Sacramento Kings and affiliated with basketball legend Shaquille O'Neal, raised US$420 million when it started trading shares last August. Its shares rose more than seven per cent following the announcement.
BowX will be joined by private investors including Starwood, Fidelity and Centaurus, who have committed about US$800 million in total to the transaction.