WeWork is in talks to combine it with a special-purpose acquisition company, according to people familiar with the matter, an agreement that would introduce the office rental company to public markets more than a year after its big failure to stage a traditional program. initial public offering.
WeWork board and CEO Sandeep Mathrani have been weighing bids for a SPAC affiliated with Bow Capital Management LLC and at least one other unidentified acquisition vehicle for several weeks, according to people. A deal could value WeWork at about $ 10 billion, according to some people. It was not known if this included debt.
The company has also received separate bids for a new round of private investment, and perhaps it should take that route, one person said. If it did, WeWork would remain private and use the money to support its growth initiatives.
The talks are complicated and there is no guarantee that WeWork will end up reaching any agreement, people warned.
“Over the past year, WeWork has remained focused on executing our plans to achieve profitability,” said Lauren Fritts, WeWork’s director of communications. “Our significant advances, combined with the increase of the demand of the market of flexible space, show positive signs for our business. We will continue to explore opportunities to help us get closer to our goals. “
Private companies are flooding special-purpose acquisition companies, or SPACs, to avoid the traditional IPO process and get a public listing. WSJ explains why some critics say investing in these so-called blank check companies is not worth it. Illustration: Zoë Soriano / WSJ
WeWork is a major player in the flexible office market. He signs long-term leases with landlords, and after renovating a space and furnishing it, subleases tenants small offices or even entire buildings for just one month at a time.
Should WeWork make its public debut through a SPAC, it would end what had been a long, bumpy road to a roster. WeWork’s attempt to take advantage of public markets in 2019 failed when investors rejected the money-losing company and its visionary but erratic leader, Adam Neumann, who later resigned as chairman and CEO.
It would also be one of the brightest markers in a fashion surrounding SPACs, or blank check companies, as they are also known. SPACs are made public as empty vehicles without business and then look for one. The transaction transforms the target into a public company into an agreement that can take less time and hassle than a traditional IPO.
This year alone, more than 80 new SPACs have been released, nearly five per business day, according to data provider SPAC Research.
Bow Capital Management is led by Vivek Ranadivé, owner of the Sacramento Kings of the NBA and founder of Tibco Software Inc. The SPAC raised $ 420 million last year. The venture company lists big basketball player Shaquille O’Neal as an advisor.
Mathrani has served nearly a year as CEO of WeWork, at which point he faced not only a company that was bleeding cash, but also a pandemic that forced people to stay away from the offices.
Although the commercial office market was hit by the virus, WeWork had a large cash cushion thanks to late 2019 rescue funding from the SoftBank group Corp.
By the start of the pandemic, WeWork had already begun closing numerous locations, renegotiating leases and selling non-core businesses, and had cut thousands of jobs to cut costs.
Some of the people said the company was not looking for capital and did not need cash immediately. WeWork, which was in danger of running out of cash when the IPO had more than $ 3 billion in its balance sheet as of the third quarter, when it last reported results. Mathrani said WeWork is expected to be profitable by the end of 2021.
WeWork had a negative free cash flow of $ 517 million in the third quarter with revenue of $ 811 million, down 8% from the second quarter.
SoftBank is majority owned by WeWork and the future role of the Japanese technology conglomerate will be a key factor in negotiations with potential merger partners or new investors.
A $ 10 billion valuation would still be a long way from WeWork’s top valuation in early 2019, when a round of SoftBank funding put it at $ 47 billion.
SoftBank and other investors were drawn to WeWork’s rapid growth, doubling its revenue each year. But this growth was fueled by extraordinary levels of spending, which resulted in equally rapid increases in losses. Following the IPO, WeWork downplayed Mr. Neumann’s great vision of providing a wealth of 21st century services around the world.
When shares fell last spring, SoftBank reduced its valuation for the company to $ 2.9 billion.
—Eliot Brown contributed to this article.
Write to Maureen Farrell to [email protected] and Konrad Putzier to [email protected]
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