(Reuters) – WeWork has agreed to go public through a merger with the blank check firm BowX Acquisition Corp, in a deal that values it at $ 9 billion, the office-sharing startup said on Friday. .
The deal marks a sharp drop from the $ 47 billion that the loss-making company was worth in 2019 before its sloppy initial public offering that imploded due to investor concerns about its founder Adam Neumann’s business model and management style.
Japanese conglomerate SoftBank Group Corp, which disclosed its investment in WeWork for the first time in 2017, will retain a majority stake while the company seeks to stay out of the pandemic-induced slowdown.
“We believe that WeWork will be the stock of recovery opportunities,” said Vivek Ranadivé, founder of Bow Capital Management, which is supporting SPAC, in an interview with CNBC. Bow Capital also features NBA star Shaquille O’Neal as a consultant.
SPAC’s shares rose about 5% at the start of the Nasdaq trading session. WeWork is the latest in a series of high profile companies that have used the SPAC route to the market. SPACs are shell companies that use the resources of a public listing to buy a private company.
WeWork CEO Sandeep Mathrani told CNBC that the company was approached by BowX and other SPACS in December. “We think it was a good time to raise additional liquidity to ensure that we have a path to profitability,” said Mathrani.
Just before WeWork discarded its IPO plans, Goldman Sachs bankers had said the startup’s valuation could reach $ 65 billion. This plummeted to about $ 8 billion after SoftBank was forced to extend a life-saving financing lifesaver for WeWork.
SoftBank and other investors have agreed to a one-year lock-up for their shares, according to a person familiar with the matter. It was not immediately clear whether the blocking agreements contain provisions or financial targets that would allow for the early sale of shares.
The current shareholders will own about 83% of the combined company, WeWork said.
Excluding ChinaCo, its joint venture in China, WeWork said it expects positive adjusted EBITDA in 2022 and revenue will more than double by 2024.
WeWork will seek $ 1.3 billion in cash from the deal, including $ 800 million in private investment from Insight Partners, funds managed by Starwood Capital Group, Fidelity Management and others, the company said.
After the closing of the transaction in the third quarter of 2021, SoftBank and its Vision Fund will have a minority representation on the board, WeWork said.
BowX Acquisition raised $ 420 million in its IPO in August last year.
Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Joshua Franklin in Boston; Editing by Ramakrishnan M. and Arun Koyyur and Saumyadeb Chakrabarty