(Reuters) – WeWork has agreed to go public through a merger with blank checking firm BowX Acquisition Corp, in a deal that values it at $ 9 billion, the shared office startup said on Friday.
The deal marks a sharp drop from the $ 47 billion the company was worth at a loss in 2019 before its failed IPO that imploded due to investor concerns about its business model and founder Adam Neumann’s management style .
Japanese conglomerate SoftBank Group Corp, which first went public with its investment in WeWork in 2017, will retain a majority stake as the company seeks to emerge from the pandemic-induced slowdown.
“We believe that WeWork will be the action of opportunity for the recovery,” Vivek Ranadivé, founder of Bow Capital Management, which supports the SPAC, told CNBC in an interview. Bow Capital also has NBA star Shaquille O’Neal as an advisor.
Shares of SPAC rose about 5% in early trading on the Nasdaq. WeWork is the latest in a series of high-profile companies to use the SPAC route to market. SPACs are shell companies that use the proceeds of a public listing to buy a private company.
WeWork CEO Sandeep Mathrani told CNBC that BowX and other SPACS reached out to the company in December. “We thought it was a good time to get additional liquidity to make sure we have a path to profitability,” said Mathrani.
Just before WeWork scrapped its IPO plans, Goldman Sachs bankers had said the startup’s valuation could hit $ 65 billion. That plummeted to roughly $ 8 billion after SoftBank was forced to extend a financial lifeline to save WeWork’s lives.
SoftBank and other investors have agreed to a one-year lock on its shares, according to a person familiar with the matter. It was not immediately clear whether the lockdown agreements contain provisions or financial targets that allow for the early sale of shares.
Current shareholders will own about 83% of the combined company, WeWork said.
Excluding ChinaCo, its China joint venture, WeWork said it expects to have positive adjusted EBITDA in 2022 and revenue to more than double by 2024.
WeWork will get $ 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 transaction closes for the third quarter of 2021, SoftBank and its Vision Fund will have minority representation on the board, WeWork said.
BowX Acquisition raised $ 420 million in its IPO in August of last year.
Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Joshua Franklin in Boston; Edited by Ramakrishnan M. and Arun Koyyur and Saumyadeb Chakrabarty