WeWork Considers Going Public Via SPAC, Jumping on Growing Trend

WeWork CEO Sandeep Mathrani is considering merging with a special purpose acquisition company (SPAC) sponsored by Bow Capital Management, which is owned by Vivek Ranadivé, the founder of TIBCO Software and owner of the National Basketball Association‘s Sacramento Kings, as well as one other vehicle, according to WSJ. WeWork is also considering a new round of private investment, which would keep the company private for the time being. 

A SPAC deal would value WeWork at around $10 billion, according to WSJ. That’s a long way to fall from its peak $47 billion valuation in 2019, but a significant improvement over its more recent $2.9 billion valuation. 

A spokesperson for WeWork said the company was exploring its options. “Over the past year, WeWork has remained focused on executing our plans for achieving profitability,” the spokesperson said in a statement. “We will continue to explore opportunities that help us move closer towards our goals.”

After WeWork’s long, drawn-out debacle in going public in the fall of 2019, it makes sense that it would want to avoid a repeat, said Alexander Snyder, an analyst at CenterSquare Investment Management. 

“It’s easier, quicker and you avoid a lot of the boiling scrutiny,” Snyder said. “The SPAC route gives [Mathrani] a lot of control and a quick, clean, direct method to go public, and that gives him the chance to run the business rather than running a public process.”

If it were to take the first route, WeWork would be joining the growing number of startups ditching the IPO and going public via SPAC instead. It’s a trend that skyrocketed in 2020 and has ramped up in 2021, with more than 80 blank-check companies launched this year alone, according to data from SPAC Research cited by WSJ. 

In general, the SPAC route consists of a sponsor, such as Bow Capital, raising a blank-check vehicle, which then goes in search for a startup to merge with and take public. The sponsor has between six months to two years to find a target, or it has to return the shares to investors. The sponsor company may not have a target in mind, but chooses a general area to focus its search. 

Tishman Speyer, one of the first real estate companies to get on the SPAC bandwagon, raised $300 million last year to invest in proptech companies and announced a merger with smart-home company Latch last week. It then announced a second, $250 million SPAC. Bow Capital has thus far launched one SPAC, BowX, which raised $420 million last year to combine with a technology, media or telecom company.

The target company is often not yet profitable and will usually only offer five-year revenue projections, which is not allowed during an IPO process. It only has to pass muster before the sponsor, which is incentivized to close on a deal within its timeline. That being said, the SPAC process can be risky for the target company, because the flip side of its speed is a lack of confidence, which leads to more volatility. 

“The long, drawn-out IPO gives people a chance to hone in on what people are willing to pay,” Snyder said. 

WeWork said it expects to be profitable within the next 12 months, according to a Reuters interview with Mathrani. Under Mathrani’s leadership, WeWork has shed all of its non-core business lines and has let go of many of over 100 newer or non-performing leases. In recent weeks, it closed four locations in Manhattan, The Real Deal reported, and has also closed offices in D.C. and Los Angeles.

WeWork got an infusion of cash at the end of 2019 through a deal with SoftBank (SFTBY) Group, which has helped keep it afloat during the pandemic months. While they may not be desperate for cash, the frothy SPAC market, as well as a retail investment market that’s sympathetic to brand-name companies who have fallen from grace, why wouldn’t WeWork take the money? 

Bow Capital did not immediately respond to a request for comment.