According to a new report in the WSJ, WeWork, the co-working juggernaut that saw its attempt at a public offering blow up in spectacular fashion in the fall of 2019, might become a publicly traded company by merging with a blank-check company.
Specifically, says the WSJ, the New York-based outfit has been “weighing offers from a SPAC affiliated with Bow Capital Management LLC and at least one other unidentified acquisition vehicle for several weeks” in a deal that could value WeWork at around $10 billion.
Asked for more information, a spokesperson for the company sent us the same statement that was sent to the Journal: “Over the past year, WeWork has remained focused on executing our plans for achieving profitability. Our significant progress combined with the increased market demand for flexible space, shows positive signs for our business. We will continue to explore opportunities that help us move closer toward our goals.”
The company is also contemplating inbound interest for more private funding, according to a person close to the company.
According to the WeWork spokesperson, WeWork currently has more than $3.6 billion of cash and unfunded cash commitments, including more than $875 million in available cash, and it believes this is “more than sufficient liquidity to weather a prolonged COVID environment.”
It’s an understatement to say the company has had its ups and downs since outside investors took at look at WeWork’s S-1 in August 2019, which showed both massive losses as well as highlighted the enormous power wielded by its cofounder and then CEO, Adam Neumann.
After WeWork’s board first pressured Neumann’s to accept less shareholder power, then elbowed him out of the company, it was taken over by one of its biggest shareholders, SoftBank, which, by October of 2019 had plugged a massive $18.5 billion into the company, including as part of a rescue package, and was determined to find a way to avoid writing down the whole investment.
By February 2020, SoftBank had found a replacement for Neumann in Sandeep Mathrani, who stepped into the role of CEO after spending 1.5 years as the CEO of Brookfield Properties’ retail group and as a vice chairman of Brookfield Properties. (Before joining the Chicago-based company, Mathrani spent eight years as the CEO of General Growth Properties. It was one of the largest mall operators in the U.S. until Brookfield acquired it for $9.25 billion in cash in 2018.)
Of course, COVID-19 soon altered any plans Mathrani might have had for the company as the U.S. and elsewhere began to shut down, forcing people everywhere to work from home. WeWork, which had already begun conducting layoffs ahead of hiring him, would go on to part ways with 8,000 employees, representing one-third of its headcount.
Still, the company began staging a comeback as the year wore on and parents and others working from home — often in tight quarters with children and spouses and flat mates — began looking for alternative working spaces. Companies that had given up on the idea of returning to a full-time office environment also began contemplating co-working spaces.
Indeed, by late October, Mathrani told reporters that WeWork was on track to turn profitable some time this year, and that after it hit “profitable growth first,” it would “revisit the IPO plan.”
Whether a traditional IPO was ever part of the strategy, it seems unlikely.
“There aren’t going to be a lot of bankers who are willing to go down the path of a roadshow again with WeWork; there’s too much historical baggage with the company,” says Zach Aarons, cofounder of the proptech-focused venture firm MetaProp in New York. “I just think the potential upside of running an IPO for WeWork isn’t that exciting,” he continues.
WeWork’s M&A options, in the meantime, may be limited. Selling to a private equity firm might be a possibility, but the buyer for whom the company makes the most sense as an acquisition target — the rival business IWG — has a $3 billion market cap.
Put another way, if WeWork wants to be valued at $10 billion — and Aarons, who has come to own a stake in the company through some of WeWork’s past acquisitions, hopes it will — a SPAC is looking like its best option.
Bow Capital Management — reportedly one of the blank-check companies in pursuit of WeWork — is run by Vivek Ranadive, the founder of Tibco Software.
In July, it registered plans for a $350 million blank-check company that would focus on acquiring a business in the technology, media and telecommunications industries.
Though there’s been much discussion over the years over whether WeWork is a tech company or much more of a pure real estate play, the company has long insisted it is the former.