WeWork is merging with a special-purpose acquisition company, SPAC, in a deal that values it at $9 billion including debt, the company said Friday.
The merger with the BowX Acquisition Corp. SPAC would take the Softbank-owned WeWork public, two years after the shared-workspace company's disastrous attempt to file an initial public offering (IPO) in 2019.
The Wall Street Journal first reported the merger Friday morning, and WeWork then confirmed the deal in a press release.
A SPAC is a company created solely to merge or acquire another business and take it public, making it a cheaper, faster alternative to an IPO, Insider's Martin Daks reported.
The valuation is less than a quarter of the $47 billion valuation WeWork achieved in January 2019, which was in part thanks to a SoftBank investment in January 2019.
But its valuation had plummeted more than 80% to below $5 billion by September 2019. The plunge reflected growing concerns about the company's business model, the controversial behavior of CEO Adam Neumann, and lax corporate governance.
The BowX Acquisition Corp. SPAC's sponsor is Bow Capital Management, run by Vivek Ranadivé, who also owns the NBA team the Sacramento Kings. NBA legend Shaquille O'Neal is an advisor to Bow Capital Management. The SPAC raised $420 million last year.
The transaction would be funded with BowX's $483 million of cash in trust, WeWork said, as well as $800 million private investment from groups including Insight Partners, funds managed by Starwood Capital Group, Fidelity Management & Research Company LLC, Centaurus Capital, and funds and accounts managed by BlackRock, WeWork said in its press release.
WeWork will get about $1.3 billion of cash from the deal, "which will enable the company to fund its growth plans into the future," it said.
Ranadivé and Deven Parekh, managing director of Insight Partners, will join WeWork's board, the company said.
SoftBank's WeWork bailout
After WeWork's IPO plans fell through, SoftBank agreed to purchase $3 billion in stock from investors and employees in a bailout package in October 2019. Neumann agreed to step down from the board.
But SoftBank walked away from the deal in April 2020. SoftBank in February of this year reached a proposed settlement with WeWork and Neumann, where it would buy around half of its original $3 billion stock purchase, the Wall Street Journal reported at the time.
Neumann stepped down as CEO in 2019 after the failed IPO, and sued SoftBank.
Under WeWork and SoftBank's proposals, Neumann would leave the company's board, too, and be paid about $480 million for a quarter of his shares in the company, the Journal reported.
Softbank owns a majority stake in WeWork.
