WeWork goes public through SPAC

More than two years after the failed initial public offering, WeWork will begin public trading on the New York Stock Exchange on Thursday, following a merger with a special purpose acquisition company.

The office rental company canceled plans to go public in 2019 after investors raised concerns about its business model and corporate governance and its founder and then-CEO Adam Newman.

Plans to merge with BowX Acquisition Corp were first announced in March, in a deal that the company was said to be worth at around $9 billion.

The valuation is a sharp decline from 2019, when WeWork was initially valued at $47 billion by the SoftBank Group. Its valuation slowly declined as the company’s financial news collapsed and investor demand increased.

“I’ve said this is a story with drama,” WeWork CEO Marcelo Clore told CNBC’s “Squawk Box” on Thursday. “Sure, this is a story in which a lot of people wrote documentaries that were the end of WeWork. Well, the resistance, and the perseverance of these people is incredible. This company is here, stronger than ever, and there is no doubt that we’re going to celebrate many milestones.”

what happened

WeWork’s problems began in August 2019, when the company’s IPO file revealed it had lost $1.9 billion the previous year and was on track to surpass its remaining cash. A broken report from the Wall Street Journal in September raised concerns about how Newman would run the company, including for potential illegal activities.

Newman resigned as CEO that month. CNBC reported in October that he would get a package worth up to $1.7 billion to walk away from WeWork and give up his voting rights. Executive Director of Real Estate Sandeep Matherani later took over as CEO.

“WeWork is an amazing brand, and if someone gave you a great brand to go around, you’d have to say yes,” Matherani told CNBC’s Squawk Box.

After the failed initial public offering, WeWork’s problems persisted. In November of that year, Reuters reported that the New York state attorney general was investigating the company, including whether Newman had engaged in self-dealing to enrich himself.

This included reports that Newman had bought the trademark for “we” and planned to collect $6 million from WeWork to transfer it. Self-dealing is when someone acts in their own interest rather than their clients.

Bloomberg also reported that month that WeWork was facing scrutiny from the US Securities and Exchange Commission over its disclosures to investors in the run-up to the failed initial public offering.

The failure of the initial public offering and the pandemic onslaught led to several rounds of layoffs at the company in late 2019 and 2020. WeWork also suffered huge losses as the Covid-19 virus shut down office spaces around the world.

Clore told “Squawk Box” that everyone has an “important role to play” and that Newman is to be commended as the visionary who came up with the idea.

SoftBank acquisition

SoftBank made its first multi-billion dollar investment in WeWork in 2017 through the $100 billion Vision Fund, which also funded Silicon Valley startups like Uber. The Japanese tech giant invested a total of $18.5 billion in WeWork in the run-up to the failed initial public offering.

In October 2019, SoftBank agreed to spend $10 billion on an 80% stake in WeWork. As part of the deal, SoftBank also said it would buy $3 billion in stock from investors and employees, but canceled those plans in April 2020, in part due to a government investigation into the company.

SoftBank gradually lowered its valuation of WeWork to $7.3 billion at the end of December 2019 and $2.9 billion in early 2020.

During an earnings presentation later that year, SoftBank CEO Masayoshi Son said he was a “fool” for investing his company’s billions in WeWork.

“We failed to invest in WeWork and I admit multiple times that I was an idiot,” he said, according to the FactSet transcript of the call.

Clore told CNBC’s “Squawk Box” that Son was “excited” about the company’s IPO.

“Two years ago, WeWork was valued at zero, and the fact that we moved it from zero to $8 billion to $9 billion is amazing,” Klore said on Squawk Box.

Back WeWork

Since then, the recovery from the pandemic has accelerated the demand for flexible workspaces, as more workers shift towards hybrid or permanent remote work.

In March, WeWork agreed to SPAC’s $9 billion merger with BowX Acquisition, a move that was completed on October 20. According to a person familiar with the matter, Reuters reported earlier.

SPACs, also known as blank check companies, are created with the sole purpose of raising money through an IPO and using that money to acquire an existing company. They’ve gone up in recent months, as have celebrities like Shaquille O’Neal Hop on trend. Companies such as Virgin Galactic and Lucid Motors used SPACs to go public, but their structure has also attracted scrutiny from the Securities and Exchange Commission.

BowX Acquisition raised $420 million when it went public in August 2020. WeWork is traded under the WE ticker.

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