WeWork goes public through SPAC merger, stock surges

• WeWork went public on Thursday through a SPAC merger more than two years after its failed IPO

• The startup halted its IPO plans in 2019 after investors raised concerns over its business model and its founder and then-CEO Adam Neumann

• The company was valued at $9 billion, a drop from the $47 billion valuation from SoftBank Group in 2019

Shares of the office-leasing company WeWork jumped as high as 12% midday on Thursday, as the company went public through a SPAC merger after the company scrapped its plans for an IPO in 2019.

In March of this year, WeWork announced that it will merge with a special purpose acquisition company BowX Acquisition Corp, which valued the company at about $9 billion.

The valuation is a sharp drop from 2019, when WeWork was initially valued at $47 billion by SoftBank Group. Its valuation slowly lowered as investors raised concerns over its business model and its founder and then-CEO Adam Neumann.

Read More: WeWork secures U.S. federal contract to provide coworking solutions to govt employees

What went wrong

A series of events started the trouble for WeWork in 2019, and as news unraveled, investors began scattering.

In August of that year, WeWork’s IPO filing revealed it had lost $1.9 billion in 2018 and was on track to run through remaining cash, and on the next month, The Wall Street Journal published a report raising concerns over how Neumann managed the company, including possible illegal activities, which forced him to step down.

In October, real estate executive Sandeep Mathrani assumed the CEO role. 

Later the company faced scrutiny from the U.S. Securities and Exchange Commission (SEC) over its disclosures to investors in the run-up to its failed IPO, and the New York State Attorney General started investigating whether Neumann engaged in self-dealing to enrich himself.

SoftBank takeover

WeWork got its first multi-billion dollar investment from SoftBank in 2017. The Japanese giant invested a total of $18.5 billion in WeWork in the lead-up to its failed IPO.

In October 2019, SoftBank agreed to spend $10 billion for an 80% stake and progressively dropped WeWork’s valuation to $7.3 billion at the end of December 2019 and $2.9 billion in early 2020.

WeWork’s comeback

The pandemic led to several rounds of layoffs at the company, and WeWork suffered massive losses as COVID-19 shut office spaces worldwide.

The opening up office spaces and the shift toward hybrid work culture in 2021 have since accelerated the demand for the company.

Read More: WeWork reports best desk sales in May after almost 2 years

In March, WeWork agreed on the SPAC merger, which was finalized on October 20.

As part of the deal, SoftBank retained a majority stake in the company and agreed to a one-year lock-up on their shares, Reuters reported earlier, citing a source familiar with the matter.

Picture Credit: Fox Business