WeWork is set to go public via a SPAC (special purpose acquisition company) merger with California-based BowX Acquisition Corp that values the shared working space company at approximately $9 billion, the company announced on Friday.
The deal marks a sharp drop from the $47 billion the company was valued at in 2019 just before an ill-fated IPO that sent it into a tailspin amid allegations of misbehavior and self-dealings on the part of WeWork co-founder, Israeli entrepreneur Adam Neumann. He stepped down as CEO in September 2019 and was offered a reported $1.7 billion in bailout funds from Japan’s SoftBank, WeWork’s biggest investor and backer, to cut ties with the company.
Softbank remains WeWork’s biggest stakeholder as the company has taken a path towards recovery with new leadership, new strategies, and the restoration of its original name as it navigates the coronavirus pandemic.
The SPAC transaction will provide WeWork with approximately $1.3 billion in cash, including $800 million in private placement investment with key investors including Insight Partners, funds managed by Starwood Capital Group, Fidelity Management & Research Company LLC, Centaurus Capital, and funds and accounts managed by BlackRock.
The funds will enable the company to back its growth plans, WeWork said in a statement on Friday.
“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, CEO of WeWork. As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever.”
Vivek Ranadivé, chairman and Co-CEO of BowX Acquisition Corp said WeWork was “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 digitize an enormous industry,” added Ranadivé.
The transaction is expected to close by the third quarter of 2021 after which Ranadivé and Deven Parekh of Insight Partners will join the company’s Board of Directors.
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“With COVID accelerating the adoption of flexible workspace around the globe, WeWork is uniquely positioned to meet rising demand in a dynamic market,” said Parekh, managing director at Insight Partners.
The pandemic, said WeWork executive chairman Marcelo Claure, “has fundamentally changed the way we work, and WeWork is incredibly well positioned to springboard into a future propelled by digital technology and a new appreciation of the value of flexible workspace. We look forward to having BowX as our partner as we look to the next chapter.”
WeWork currently has 851 locations in 152 cities, totaling more than one million workstations where enterprise companies make up more than 50 percent of memberships. The company has also let go of all of its non-core ventures and reduced staff by 67 percent from its peak in September 2019, WeWork indicated.
Going forward, WeWork said it intends to expand beyond its core business through its On Demand, All Access, and Platform offerings, enabling users to choose when, where, and how they work through the WeWork mobile app. The company further indicated it has a $4 billion total sales pipeline and an estimated $1.5 billion in committed 2021 revenue.
Softbank, meanwhile, became engaged in a legal battle with Neumann since the Japanese company withdrew an offer in April 2020 to buy 80 percent of the WeWork that included a commitment of $5 billion in funding and a tender offer for another $3 billion for shareholders outside of Softbank. These included Neumann, employees, and other investors.
The terms were not disclosed, but Bloomberg reported that Neumann will sell $480 million in stock to SoftBank and give up his role on the board of the company he helped create for a year. Citing people familiar with the agreement, Bloomberg reported that SoftBank was also set to pay Neumann $50 million for legal fees and another $50 million as part of a non-compete fee he was previously promised, in addition to a five-year extension on a $430 million loan he owes the Japanese investor