A Dramatic Fall in Value
The share-office company announced today it will merge with a BowX Acquisition SPAC company in a $9 billion business deal. As a result, WeWork will soon become a publicly-traded company.
Once the business deal is completed, WeWork will get $1.3 billion in proceeds that will be mostly channeled to fund its growth plans into the future. This amount includes a fully committed $800 million private placement business investment from major investors, including Insight Partners, Starwood Capital Group, Fidelity Management & Research Company LLC, Centaurus Capital, and funds and accounts managed by BlackRock. The other part of the funding — $483 million — will come from BowX.
WeWork will still be led by Marcelo Claure and Sandeep Mathrani, who act as executive chairman and chief executive officer (CEO), respectively. BowX’s Vivek Ranadivé and Deven Parekh of Insight Partners will join the company’s board of directors.
“WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn. As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever. Having Vivek and the BowX team will be invaluable to WeWork as we continue to define the future of work,” Sandeep Mathrani, CEO of the New York-based company, said in a statement.
This business deal marks another SPAC deal on Wall Street, with the total SPAC activity so far in 2021 already exceeding the full 2020 amount. For WeWork, it highlights a sharp fall in business valuation as the company was valued at $47 billion in January 2019 following a huge investment from the Japanese investment business titan SoftBank.
The company initially wanted to go public via initial public offering (IPO), before these plans fell through. SoftBank stepped in and bought $3 billion in stock in October 2019, while CEO Adam Neumann stepped down from the board. However, the banking business giant walked away from the deal a few months later and finally purchased only half of the original $3 billion stock purchase.
Investors believe that WeWork’s business valuation contracted sharply due to the company's troubled business model, controversial CEO Adam Neumann, and negligent governance.
On the other hand, a BowX SPAC raised $420 million earlier this year. It is tied to Bow Capital Management, which is headed by billionaire entrepreneur Vivek Ranadivé. Interestingly, NBA legend Shaquille O'Neal is an advisor to the company.
SoftBank still has a majority stake in WeWork.
In another multi-billion SPAC deal, WeWork and BowX Acquisition agreed to merge in a 9 billion deal. A shared-workspace company will receive $1.3 billion to fund its growth plans, with $800 million coming from investors and $483 million from a BowX Acquisition SPAC business.