Coworking company WeWork announced on Friday that it would break into Wall Street by merging with BowX Acquisition Corp in a deal valuing it at $ 9 billion. BowX is a SPAC, that is, an investment vehicle listed on the stock exchange but without operational activity. Very popular on Wall Street since 2020, PSPCs allow you to acquire unlisted companies, so as to go public with less constraints than during a traditional IPO. The deal with BowX, an empty shell that went public last year, will allow WeWork to recover “about $ 1.3 billion” in new money, a statement said.
PSPCs have become a very popular alternative to traditional IPOs. In 2020, some 240 of these special purpose acquisition companies were launched in the United States and raised around $ 80 billion. Between January and February 2021, more than 140 PSPC issues, also known as “blank check companies” raised more than $ 40 billion in capital.
BowX will provide $ 483 million in cash and several funds, including Insight Partners, Starwood, Fidelity, Centaurus and BlackRock, have pledged $ 800 million in total. The operation should be finalized by the third quarter.
Founded in 2010, WeWork was built on a shared office model, which combines flexibility and user-friendliness. The company typically signs long-term leases with landlords, renovates the premises and sublets them on a short-term basis to individuals or businesses. A start-up with a dynamic and innovative image, WeWork quickly won over investors, reaching a theoretical valuation of $ 47 billion in January 2019.
IPO abandoned in 2019
But faced with growing mistrust of its business model and the erratic behavior of its boss Adam Neumann, in September 2019 it had to give up a previous IPO project, at a fairly advanced stage of the operation.
To save WeWork from bankruptcy, the main shareholder, the Japanese, had to inject several billion dollars, and push Adam Neumann towards the exit. Softbank reached an agreement in late February ending a feud with the former boss and several shareholders, allowing the two groups to settle their legal dispute.
According to documents consulted by the Financial Times, the company lost $ 3.2 billion in 2020. “This company is poised to achieve near-term profitability, but the opportunity for long-term growth and innovation is what has made WeWork an ideal partner. for BowX, ”BowX Chairman and Co-CEO Vivek Ranadivé said in a statement.
“With a fantastic core business, I see WeWork as a business at an inflection point, with an incredible group of key people, coupled with the vision and leadership needed” to shake up the real estate industry, he said. -he adds.
The company argues that it cut operating expenses by $ 1.1 billion in 2020 and building management expenses by $ 400 million. It has also separated from activities that do not necessarily correspond to its core business and reduced its workforce by 67% compared to the peak in September 2019. It claims to have generated a turnover of 3.2 billion dollars in 2020, excluding China.